The China White Paper 1949

SP 63 / Two volumes, $7.50 a set

CHINA

WHITE

PAPER

August 1949

VOLUME I

Originally Issued as

UNITED STATES RELATIONS WITH CHINA
With Special Reference to the Period 1944-1949
Department of State Publication 3573
Far Eastern Series 30

Reissued with the Original Letter of Transmittal
to President Truman from Secretary of State Dean Acheson

WITH A NEW INTRODUCTION BY LYMAN P. VAN SLYKE

STANFORD UNIVERSITY PRESS

062121

Library

College of Boca Raton
Boca Raton, FL 33431

THE CHINA WHITE PAPER

E

183.8

.C5

THE CHINA
WHITE PAPER

August 1949

Originally Issued as

UNITED STATES RELATIONS WITH CHINA

With Special Reference to the Period 1944-1949

Department of State Publication 857 3
Far Eastern Series 30

Reissued with the Original Letter of Transmittal to President Truman
from Secretary of State Dean Acheson
and with a New Introduction by
LYMAN P. VAN SLYKE

STANFORD UNIVERSITY PRESS
Stanford, California

The China White Paper was originally issued by the United States Department of State
in August 1949 under the title United States Relations with China , With Special Reference
to the Period 19 44-19 49. The present edition is identical to the original except for the
unnumbered front matter, ending with the Introduction by Lyman P. Van Slyke; the
correction of some sixty typographical errors and minor discrepancies of orthography;
and the addition of an Index. The Index was prepared for the present edition by
Willard A. Heaps.

Stanford University Press
Stanford, California

Introduction and Index © 1967 by the Board of Trustees
of the Leland Stanford Junior University
Printed in the United States of America
Cloth ISBN 0-8047-0607-7
Paper ISBN 0-8047-0608-5
Last figure below indicates year of this printing:

79 78 77 76 75 74 73 72 71 70

Introduction

by Lyman P. Van Slyke

Until the Japanese attack on Pearl Harbor, American attitudes toward
China were shaped by the missionary and the trader, who operated
under the system of the unequal treaties forced on China by the Western
powers. The United States benefited fully from such treaties— and
even contributed to their final form by adding the concept of extra-
territoriality — but because Americans had not taken the initiative in
setting up and enforcing the treaty system, the American people felt
little responsibility for its inequities. In time, Americans came to feel
that their behavior in China contrasted favorably with the selfishness
of the European powers and Japan, and this feeling was greatly height-
ened by the idealism and moral fervor of the American missionary
effort. The trader and the businessman— advocating free trade and
opposing exclusive spheres of influence— represented America’s eco-
nomic stake in China. But this was never more than a very small
part of American overseas investment.

In the end, therefore, there grew up a split between our attitudes and
our actions. Having no great political or economic stake in China, we
were inclined to frame our China policy in moral terms; but for the
same reason, we were unwilling to back our policies, however just,
against the conflicting policies of nations with higher stakes in the game.
There was no conscious duplicity on our part. Our China policy re-
flected our feelings as a nation; if we were reluctant to back these feel-
ings, it was because our vital interests were not really involved in China.

All this was symbolized by the Open Door policy. Originally an
affirmation that every nation should have equality of economic oppor-
tunity in China, the Open Door policy was soon redefined as a call for
the territorial and administrative integrity of China; but it never led
to effective action on our part to ensure China’s independence. Never-
theless, thanks to our philanthropic and educational work in China,
our willingness to forgo our share of the Boxer indemnity, and our
government’s repeated expressions of goodwill, we came to think of the
United States as China’s close friend and benefactor.

INTRODUCTION

Thus, on the eve of Pearl Harbor, although all our sympathies lay
with China, we characteristically continued normal relations with Japan.
The Japanese attack forced a change in our policies, but it was still
impossible to give China much military help. In the first months of
the war, there was no materiel to spare; and later it was all but impos-
sible to get supplies to China’s isolated armies. Most important,
Europe took clear priority over Asia in the Allies’ master plan for the
war; and in Asia, by 1943 the island-hopping strategy obviously had
replaced the strategy of attacking Japan through China. In military
terms, China was a sideshow.

To compensate Chiang Kai-shek politically and to keep China ac-
tively in the war, Roosevelt pushed China’s recognition as one of the
Big Four over British objections, and dramatically terminated the
unequal treaties in 1943. In these moves, Roosevelt had the enthu-
siastic support of the American public, which felt that America had
done too little for China in the past and which saw the Generalissimo
and Madame Chiang as heroic allies against the Japanese aggressor.
But once again, United States policy, in its generosity and optimism,
did not necessarily reflect the realities of the situation.

While we were committing ourselves to Chinese greatness under
Chiang, the Nationalists were becoming increasingly ineffective.
Shocking stories of corruption and dictatorial high-handedness came
out of Chungking. Friction between the Nationalists and the Com-
munists threatened to erupt into civil war. Chiang also hinted that
unless American aid were forthcoming on Chinese terms, China might
be forced to make a separate peace, thereby releasing large Japanese
forces. The almost unopposed Japanese offensive into the interior of
south China in 1944 seemed to confirm all these fears.

By October 1944, when General Joseph W. Stilwell, who favored a
tough quid pro quo policy toward Chiang, was recalled at the Generalis-
simo’s insistence, General Patrick J. Hurley had already arrived in
China. He expressed clearly the goals of American policy: to keep
China in the war, to support Chiang and the National Government,
to persuade Chiang to undertake certain reforms, and to promote the
unity and democracy to which all Chinese parties proclaimed their
dedication. It is clear now that these goals were irreconcilable, for if
there was no possibility of withdrawing our support from Chiang, there
was no way of getting him to make changes he did not choose to make.
America’s role as mediator was compromised for the same reason. But
this was far from clear at the time, except to those who knew the situa-
tion in China most intimately. Americans in 1944-45 were in substan-
tial agreement that China policy, broadly speaking, was being ade-

INTRODUCTION

quately handled. This consensus lasted until well after the war; even
Hurley’s parting broadside (pp. 581-84) failed to shake it.

Partisanship on the China issue did not really begin until after the
Congressional elections of November 1946, which put Republican
majorities into both the Senate and the House and marked the low
point of the Truman Administration’s influence. In January 1947,
General George C. Marshall, who had succeeded General Hurley as the
President’s Special Representative in China, reported the failure of his
efforts to arrange a peaceful settlement, and returned home to become
Secretary of State. The Republicans— anticipating the Presidency in
1948— used their majorities in Congress to exert an increasingly power-
ful influence on foreign policy. A group of Congressmen (led by
William Knowland and Styles Bridges in the Senate, and by Walter
Judd in the House) called for increased aid to the Nationalists in their
conflict against the Chinese Communists. Nothing could alter their
belief in the greatness of Chiang Kai-shek, or their conviction that the
Chinese Communists were Russian puppets.

During 1947 and 1948, the Republicans used the threat of torpedoing
the Marshall Plan for the recovery of Europe as a way of getting sup-
port for China. Among other things, they argued that if a strategy of
massive foreign aid was appropriate to Europe (i.e., Greece), it should
also be applied in Asia (i.e., China). So long as this balance of power
existed on Capitol Hill, the Administration felt it necessary to make
cautious concessions on the China front in order to move ahead with
the rest of its foreign program.

Marshall, who was convinced that only all-out military intervention
could save Chiang, favored a policy of quiet disengagement from China.
Not only were America’s resources insufficient for military intervention
in his opinion, but the American people would not sanction such a
course. And yet disengagement had almost as high a price, thanks not
only to the embattled political situation in Washington, but to the
accumulated weight of past American relations with China. How
could we simply abandon a traditional friend, an ally who had suffered
so long, a member of the Big Four by virtue of our own insistence?
Marshall wavered, then moved from quiet disengagement back to
limited commitment. The principal concessions of the Administra-
tion were the resumption of arms shipments to the Chinese Nationalists
in early 1947, the dispatch of the Wedemeyer mission later that year,
and the China Aid Act of April 1948.

This unstable situation lasted until the unexpected Democratic vic-
tory in the 1948 election. With both houses of Congress once more in
Democratic hands, the Administration no longer had to buy Repub-

INTRODUCTION

lican support for its legislative program at the cost of concessions on
China. Instead of reducing partisanship on the China issue, however,
the Democratic victory only heightened it. Earlier the Republicans
had been overconfident and a little complacent; now, in the bitterness
of defeat, they sought to draw blood wherever they could.

As the plight of the Nationalists worsened, Republican attacks on
Administration policy became more frequent and more heated. By
now, too, a new note had been added— the question of Communist in-
fluence on China policy in the State Department. In 1947, the Truman
Administration had begun a program of security investigations that it
hoped to keep confidential, but a number of sensational cases were re-
ceiving publicity all during 1948. Eleven Communist leaders were
trading blows with Judge Harold R. Medina in a Smith Act trial in
New York City; Judith Coplon of the Justice Department, allegedly a
Communist, was under indictment for conspiracy; Klaus Fuchs had
confessed to atomic espionage on behalf of the Soviet Union; and the ex-
Communist Whittaker Chambers was describing his conspiratorial rela-
tions with Alger Hiss, a high official of the State Department. There had
been sporadic charges made earlier against certain career China spe-
cialists, beginning with Hurley’s letter of resignation in 1945, but by
1949 the atmosphere had grown feverish. This was the immediate
background for Senator Joseph McCarthy’s notorious effort, beginning
in early 1950, to discredit the State Department as a whole.

The White Paper was thus published in the midst of acrimonious
controversy over United States China policy, the containment of Com-
munism abroad, and the fear of subversion at home.

The idea of a White Paper may have first been suggested by middle-
level officers in the State Department’s Office of Far Eastern Affairs.
Secretary of Defense James V. Forrestal recorded in his diary that at a
conference held on November 26, 1948, “Marshall read a paper from
some office people in the State Department, who advocated going to the
American public now to explain the inadequacies of the Chiang Kai-shek
government.” Marshall went on to say that he had decided, with the
President’s approval, to reject this suggestion because he felt it would
administer the coup de grace to Chiang. 1 The idea persisted, however,
and the following spring, after Dean Acheson’s appointment as Sec-
retary of State, Acheson obtained Truman’s approval to go ahead with
the preparation of a White Paper on China.

When Acheson said later that the White Paper had been published
in the belief that “the disasters had already overtaken the Nationalist

1 Walter Millis, ed., The Forrestal Diaries (New York: Viking, 1951), p. 534.

INTRODUCTION

government,” 2 he meant that the White Paper could not have hastened
a collapse that was already complete. By implication, the decision to
publish the White Paper reflected the feeling that since we could no
longer effectively influence events in China, we should not be entangled
in them. This was the agonizing decision Marshall had shrunk from
making a year earlier, when there may still have been grounds for hop-
ing that a Nationalist collapse could be averted. By the spring of 1949,
such grounds existed no longer. The Nationalist cause was in ruins: in
January, Chiang Kai-shek quit the Presidency and Peiping fell; in
April, Communist troops crossed the Yangtze without opposition, and
peacefully occupied Shanghai a few days later.

The directive from President Truman and Secretary Acheson to the
compilers of the White Paper called for a completely objective record.
Yet the Administration plainly hoped this record would show that we
had done as much as we could, that our course had been basically cor-
rect, and that the impending fall of China to the Communists was in no
way attributable to American policy. The White Paper was issued to
counter largely Republican criticism. In Truman’s words, “The role
of this government in its relations with China has been subject to con-
siderable misrepresentation, distortion, and misunderstanding. Some
of these attitudes arose because this government was reluctant to reveal
certain facts . . .” 3 Truman believed his two goals— objectivity and
justification— were compatible. His critics, as it turned out, found the
White Paper neither objective nor convincing.

In overall charge of the project was W. Walton Butterworth, who was
concurrently Director of the Office of Far Eastern Affairs and Acting
Assistant Secretary of State for Far Eastern Affairs. Because of the
weight of his duties, Butterworth delegated the actual preparation of the
White Paper to his division officers, several of whom he detailed to full-
time work on the project. Beginning about March 1949, the White
Paper became a round-the-clock effort for those involved. Most of the
work of writing and editing was done by five or six officers with recent
and extensive experience in China. 4 Only materials in the files of the
Department of State were used. To have searched for and sought the
release of documents in other agencies— especially the former War
Department— would have greatly delayed publication of the White
Paper, and Acheson was anxious that it be issued as soon as possible.

2 U.S. Senate, Committee on Armed Services and Committee on Foreign Relations,
Hearings on the Military Situation in the Far East, 82d Cong., 1st Sess. (1951), p. 1770.

3 Department of State, Bulletin , Aug. 15, 1949, p. 237.

4 Many others helped in the preparation of the document, particularly in the Divi-
sion of Historical Policy Research under G. Bernard Noble, but unless one counts
archivists, secretaries, and clerks, the total number was far less than the eighty persons
alleged by the journalist Arthur Krock.

INTRODUCTION

This complete reliance on State Department files later led to charges
that the White Paper was inadequate in its coverage.

In late June 1949, when the White Paper was nearly finished, Acheson
asked Ambassador-at-Large Philip C. Jessup to read the document and
suggest changes in it. Jessup, a professor of international law with a
distinguished career at Columbia, was at that time the United States
representative to the United Nations General Assembly and had been
working on negotiations concerning the Berlin blockade. Later, during
McCarthy’s attacks on Jessup, the erroneous impression was given that
the White Paper was largely his creation. Actually, the changes he
suggested were few. Jessup did have an active hand, however, in
preparing Acheson’s Letter of Transmittal, the most controversial
document in the volume. The letter subsequently went through
many hands and many drafts before Acheson finally reworked it to
suit himself.

As one might expect, the White Paper is composed primarily of docu-
ments and excerpts from documents, nearly all of which were highly
classified before the White Paper was published. This preponderance
is greater than appears at first sight, because even the narrative section
contains long quotations from documents. Although the period of spe-
cial reference is from 1944 to 1949, nearly one-fifth of the volume deals
with the century from 1844 to 1943. There is very heavy emphasis —
about 40 per cent of the total — on 1947 and 1948 (there are only a very
few documents dating from early 1949). The volume’s coverage is
least extensive for 1944 and 1945. 5 Originally scheduled for release at
the end of July, the White Paper was held up for about a week by print-
ing difficulties. Because of the rush to publish, no index was prepared.
The White Paper was released to the public on August 5, 1949, at a
price of three dollars.

In issuing the White Paper, the Administration was proceeding in the
belief— or the hope— that the record would speak for itself. Though its
principal significance lay in domestic politics, one could expect the White
Paper to have a very pronounced impact on both parties in China. Let
us consider this impact briefly before turning to its reception in the
United States.

The Chinese Communists made the White Paper the center of their
first mass anti-American campaign. There had been much Communist-
inspired criticism of the United States in the past, but there remained in

5 Extensive and fascinating new documentation covering 1944 is now available in
Department of State, Foreign Relations of the United States, 1944 > Vol. VI: China
(Washington, D.C., 1967), 1,206 pp. Similar volumes covering 1941, 1942, and 1943
were published earlier.

INTRODUCTION

China considerable reservoirs of good feeling, particularly among the
intellectuals and bourgeoisie in the cities. These reservoirs the Party
now set out to drain, as a part of the larger movement to eliminate
Western influence from China.

The last five articles in Volume IV of Mao’s Selected Works denounce
the United States in general and the White Paper in particular. Mao’s
editors describe the goals of the campaign when they say that these
pieces “exposed the imperialist nature of United States policy toward
China” and “criticized the illusions about U.S. imperialism harbored by
some of the bourgeois intellectuals.” 6 These articles were the signal for
an intense campaign that reached wherever Communist influence was
felt. In Nanking, for example, during more than a month following
Mao’s denunciation, only one issue of the Party paper failed to attack
the White Paper, and sometimes additional pages were needed for this
purpose. Mass rallies, well-attended by students and American-
trained intellectuals, were held in all cities under Communist control.

The campaign sought to discredit the United States for everything it
had done in China since the Treaty of Wanghia in 1844, and especially
for its recent actions. The Chinese Communists did not find it neces-
sary, or desirable, to translate the White Paper. Instead, they concen-
trated almost entirely on extracts from Acheson’s Letter of Transmittal:
the amount of aid given to the Nationalists; the assertion that the
United States had done all it could to support Chiang; the claim that the
“Communist leaders have foresworn their Chinese heritage” and are
subservient to Russia; and above all, the statement that the United
States should encourage developments to “throw off the foreign yoke.” 7

In this campaign, John Leighton Stuart, a former president of Yen-
ching University, was particularly singled out, both as our last ambassa-
dor on the mainland, and also because he represented so well all that
was finest in the American philanthropic and educational tradition in
China. In “Farewell, Leighton Stuart!” Mao denounced him as one
who “used to pretend to love both the United States and China.” The
article ends venomously: “Leighton Stuart has departed and the White
Paper has arrived. Very good. Very good. Both events are worth
celebrating.” 8

In Nationalist circles, the public and official reaction to the White
Paper was surprisingly mild. When it became known, late in July, that

6 Mao Tse-tung, Selected Works (Peking: Foreign Languages Press, 1961), IV, 426.

7 Deliberately or not, one phrase (on p. xvi) was usually mistranslated in such a way
that the United States appeared to be calling on Western-trained Chinese to revolt:
“ultimately the profound civilization and the democratic individualism [the Commu-
nist press here translates ‘democratic individualists’] of China will reassert themselves
and she will throw off the foreign yoke.”

8 Mao, Selected Works, IV, 439.

INTRODUCTION

such a document was about to be published, V. K. Wellington Koo, the
Chinese Ambassador, requested postponement. On August 6, he ac-
knowledged that China might have been “guilty of acts of commission
and omission in the past” but asserted that “mistakes have not been
confined to my country.” He stressed the common cause that China
was making still with the United States for freedom from Communism. 9
In Canton, Acting President Li Tsung-jen’s capital, there was anger and
dismay. Officially, however, Foreign Minister George Yeh stated on
August 16 that whereas the Nationalists took “serious exception” to the
White Paper on many points, “it is not the intention of the Chinese
Government to engage in controversy over past issues.” He was glad
to see, he said, that the two countries agreed completely on at least two
points: that the Chinese Communists were “thorough Marxists and
tools of Moscow,” and that the Soviet Union had violated the Treaty of
Friendship and Alliance with China. 10

Indirectly, the White Paper probably had something to do with the
later reforms in the Kuomintang. As CITen Ch’eng, then Governor of
Taiwan and later Vice-President, said at the time, “The White Paper
has awakened us; we must now start on the road to self-help. Hence
the publication of the White Paper will not cause us harm.” 11 Chiang
Kai-shek, then in nominal retirement, made no public statement and
advised against an official Nationalist effort to refute the White Paper.
Behind the scenes, however, the Nationalists continued to seek United
States military aid, and to press their cause through their advocates in
this country.

The reaction in the United States was predictably impassioned. No
one could assert— or tried to assert— that United States policy in China
had been successful. The best the Administration could hope for was
acceptance of the White Paper at face value. A few liberal publica-
tions, among them the New Republic and the Washington Post , accepted
it on these terms, but their voices went almost unheard in the clamor of
criticism. The White Paper was attacked both for the policies it de-
scribed and as a record of the effort to carry out those policies.

The main charges against the White Paper as a historical document
were overall bias, omission and distortion, and premature publication.
According to an editorial in the New York Times , “This inquest on
China is not the work of a serene and detached coroner but of a vitally
interested party to the catastrophe.” Time , speaking for the Luce
publications, called it a “lawyer’s brief.” Patrick Hurley, a vitally
interested party himself, denounced it as a “smooth alibi for the pro-

9 New York Times , Aug. 8, 1949, p. 2.

10 Ibid., Aug. 17, 1949, p. 4.

11 Ibid., Aug. 8, 1949, p. 2.

INTRODUCTION

Communists in the State Department who have engineered the over-
throw of our ally.” Many argued that the Administration was trying
to put all the blame on Chiang Kai-shek and assume none itself.

The State Department was also accused of deliberately omitting or
distorting documents that did not support the Truman- Acheson policy.
In the House, Walter Judd alleged sixteen instances of omission, falsi-
fication, or distortion. Acheson answered the allegations point by
point, and repeated his assertion that the White Paper was a “fair and
honest record”; the most important document referred to by Judd, he
pointed out, was not held by the State Department and was thus not
eligible for inclusion. 12 A few felt that the White Paper was slanted in
the other direction. Owen Lattimore, soon to be himself the center of
controversy, saw the White Paper as an effort to show “that in pursuit
of impeccably anti-Russian aims the United States had engaged in as
much intervention as the traffic could possibly bear.” 13

In handling the materials of history, each act of selection is also an act
of judgment, and therefore the charge of bias is never completely an-
swerable. But the charge that the White Paper was deliberately
slanted is not substantiated by any materials that have since been made
public. For the period from 1945 through 1948, the White Paper still
stands as our most important single source for the study of United
States relations with China.

The White Paper was also criticized for its timing. To some, the
Nationalists were “still stubbornly squirming with life,” and this docu-
ment would undermine their efforts to stem the Communist tide. There
were also those, including some within the State Department, who
agreed with everything about the White Paper except its publication.
They felt it was unnecessary and undignified for the United States to
rush into public print with matters best handled behind closed doors,
and with documents recently composed on the writers' assumption of
official privacy.

On the level of policy, critics of the White Paper generally took the
line that America's misguided or calculated failure to give Chiang Kai-
shek the help he needed to beat the Chinese Communists was leading to
Russian control of Asia. This charge broke down into a number of
more specific charges: (1) that at Yalta the United States had sold China
down the river to bribe Russia to enter a war we had already won; (2)
that the Marshall mission's effort to form a coalition government in
China had been designed to force the Nationalists into the lethal em-
brace of the Communists; (3) that in 1947 the Administration had sup-

12 Judd made his charges on August 19. For Acheson’s rebuttal, see Department of
State, Bulletin, Sept. 5, 1949, pp. 350-52, 359.

13 The Nation , Sept. 3, 1949, p. 223.

INTRODUCTION

pressed the Wedemeyer Report, which had recognized the Communist
threat to Asia and had called for aid to the Nationalists; (4) that reason-
able amounts of military aid, without American military participation
except for advisers, would have enabled Chiang to defeat the Chinese
Communists; (5) that disloyalty and pro-Communism in the State De-
partment had an evil influence on our China policy.

Although most of these charges remain in some minds controversial to
this day, some things seem clearer now than they did twenty years ago.
While Yalta, for example, was surely one of Roosevelt’s least auspicious
exercises in personal diplomacy, the record shows that Russia’s partici-
pation in the decisive struggle against Japan was still thought absolutely
necessary. Furthermore, Chiang had explicitly requested the United
States to act as mediator between China and Russia; in order to lure
Stalin away from the Chinese Communists, he had offered to make some
(not all) of the Yalta concessions that were later so bitterly assailed.

The unification of China by political means (that is, some form of
multi-party or coalition government) was the announced aim of both
the Nationalists and the Communists even before General Hurley ar-
rived on the scene in 1944. Not only Marshall, but Hurley before him,
tried to find some formula that both parties could agree on; indeed,
Hurley himself was the principal drafter of a set of proposals for the
Chinese Communists to present to the Nationalists. 14 He called its
terms “eminently fair,” adding that “if there is a breakdown in the par-
leys it will be the fault of the Government and not the Communists.”
So far as concessions to the Communist viewpoint are concerned, Hur-
ley’s proposal, which the Kuomintang found utterly unacceptable and
which Hurley complained to Roosevelt “had not been treated with due
consideration,” far surpassed any proposal later made by Marshall.

Acheson’s Letter of Transmittal stated that the Wedemeyer Report
had not been released because it called for Russian participation in a
five-power guardianship over Manchuria. But other considerations
were probably equally compelling. One was General Wedemeyer’s
blunt indictment of Nationalist corruption and incompetence, which
was about as sweeping in 1947 as the White Paper’s two years later.
Another was the self-contradictory nature of Wedemeyer’s recommenda-
tions: he concluded that “until drastic political and economic reforms
are undertaken, United States aid cannot accomplish its purpose,” yet
he called for extensive assistance to China “as early as practicable.” A
third was Wedemeyer’s ill-considered proposal that aid be granted only
if China requested advisers with considerable power in “specified eco-
nomic and military fields.” Chiang had never granted such powers in

14 Foreign Relations , 19J+J+: China , pp. 666-735, documents under file no. 1049; the
two brief quotations in the next sentence are from p. 693 and p. 734.

INTRODUCTION

the past; had he done so now, as Marshall realized, it would have been a
long step toward full-scale American involvement in the Chinese civil
war.

As for the amount of American aid to China, the whole issue has a
quality of unreality. Estimates of our aid to the Nationalist Govern-
ment ranged from a low of $110 million (Senators Bridges, Knowland,
Pat McCarran, and Kenneth Wherry, and the Chinese Embassy in
Washington) to a high of $5.9 billion (Mao). The State Department
(see pp. 1042-53) showed postwar aid of just over $2 billion, about half
of which was classed as military aid. To the Nationalists and their
supporters, any amount of aid would have been insufficient if it failed to
defeat the Communists. To those who opposed further military aid,
the fall of the Kuomintang was the result of its own inadequacies; the
waste of past aid showed that future aid would do no good, and nothing
in Chiang’s record warranted the risk of an open-ended American com-
mitment of unforeseeable size.

Surely the ugliest and probably the most damaging aspect of the
furor was the allegation of Communist influence in the State Depart-
ment. McCarthy’s charges finally proved baseless, but in the mean-
time lives and careers were ruined and lasting harm was done to the
conduct of America’s foreign policy. The reception of the White Paper
instructed many government officials in the value of caution, and per-
suaded numbers of capable young men to seek careers elsewhere. Some
of America’s most able and best qualified China specialists were dis-
missed from the State Department, later to be offered reinstatement and
back pay when it was shown that there was no case against them. Others
were transferred to less sensitive positions, where often the road to ad-
vancement was blocked by their previous association with fthina.
Some were persuaded to accept early retirement. In any case, their
long experience and intimate knowledge of China were lost. Among
the best known of these men were John Carter Vincent, John Stewart
Service, and John Paton Davies. Their reports on China in the 1940’s
have stood the test of time; by contrast, what few criticisms might be
made of their work now seem hardly more than cavils. Many of the
reports for which they were later condemned were penetrating insights
into Chinese political realities. They saw clearly, and warned their
superiors, of the danger of tying the United States irrevocably to a re-
gime that was rapidly discrediting itself and might well be unable to
survive. For telling unpleasant truths about the Nationalists, they
were later called Communists. Professor John K. Fairbank’s tribute
to them is no more than just: “These men were true China specialists
and we have no one like them today [1967]. In our lifetime we shall
never again get this much of a grasp of the Chinese scene.”

INTRODUCTION

Almost alone in its judiciousness and insight was Walter Lippmann's
reaction to the White Paper. 15 If Acheson was right that nothing the
United States had done or left undone had affected the outcome in
China (p. xvi), then, Lippmann asked, why did we continue so long and
at such cost to support the side we knew was going to lose? At the
time, he was one of the very few who saw and described Marshall's
dilemma, which reflected in a modern form America's traditional in-
ability to bring its China policy into line with its effective influence in
China.

Both critics and supporters of the Truman Administration knew that
the White Paper marked the end of an era, and both sides called for a
thoroughgoing reappraisal of our Far Eastern policy. Just before the
publication of the White Paper, Acheson announced that such a review
had been initiated within the State Department, that top-level outside
advice was being sought, and that close liaison would be maintained
with Congress and other agencies of the executive branch. On October
6-8, 1949, at a closed-door session on Far Eastern policy in Washington
some twenty-five China specialists, international businessmen, and
public figures (including Marshall, George F. Kennan, and Harold E.
Stassen) expressed their opinions on what course American policy should
take. 16 Subsequently, the trend of policy, which with certain excep-
tions represented rather well the sense of these discussions, was to with-
hold recognition from the Communists while at the same time further
dissociating the United States from the Nationalists. The United
States also indicated it would regard any Chinese Communist military
or political activity beyond the borders of China as a threat to peace.

This policy was plainly expressed in January 1950. In a series of
statements, Truman and Acheson indicated that the United States
would not provide military aid or advice to “the Chinese forces on
Formosa," that we intended to keep “hands off," and that the island,
having little strategic significance, lay outside our first line of defense in
the Western Pacific. Criticism of the Administration reached a new
pitch, fed now by McCarthy's charges, but the policy of disengagement
remained in force.

Early in the morning of June 25, 1950, North Korea launched its in-
vasion of South Korea. Truman reacted immediately through the
United Nations. Two days later, on June 27, he sent the Seventh Fleet
into the Straits of Formosa with orders to prevent any attack on the is-

15 In the columns of the New York Herald Tribune on Sept. 6, 8, and 12, 1949.

16 The transcript of the discussions is contained in U.S. Senate, Committee on the
Judiciary, Subcommittee to Investigate the Administration of the Internal Security
Act, Hearings on the Institute of Pacific Relations , 82d Cong., 1st Sess. (1951), pp. 1551-

INTRODUCTION

land. Our present commitment to the Nationalist Government dates
from that order. The Korean War thus brought to a sudden end the
policy that the Administration had followed for two years, and com-
mitted us once again to involvement in the Chinese civil war.

Because history never repeats itself exactly, no two historical situa-
tions are entirely analogous. But a number of parallels between the
more recent situation in Vietnam and the earlier situation in China are
too striking to be ignored. In both situations, our recognition and
support went to a regime with acknowledged shortcomings but to which
there seemed to be no adequate alternative. In both there existed the
elements of both civil war and international aggression, with a great
debate about which was the dominant force. In both there were abun-
dant predictions that limited aid and advice, without direct American
military participation, would bring victory in a short period of time. And
in both, withdrawal became more difficult as time went on. The ob-
vious difference is that in Vietnam the decision was made to engage. In
Vietnam, smaller in size and population than many Chinese provinces,
what began as limited and indirect assistance has grown to a half million
men and $2 billion per month. In retrospect, it appears that Marshall
saw clearly where further intervention would have led in China (p. 382) :
“The U.S. would have to be prepared virtually to take over the Chinese
Government and administer its economic, military and governmental
affairs. ... It would involve this Government in a continuing commit-
ment from which it would be practically impossible to withdraw, and it
would very probably involve grave consequences to this nation by
making of China an arena of international conflict. ”

These reflections lead us back to crucial questions, questions that the
White Paper raises but cannot fully answer because America itself has
not yet given the answers. If in China there was a gap between what
we said and what we did, in Vietnam the United States has tried to close
this gap not by expressing its goals in less sweeping terms but by pur-
suing them with vastly greater force. Are the goals of United States
Asian policy justified? Is the United States able to achieve such goals?
And at what point does the employment of force render meaningless the
very goals it seeks? In China as in Vietnam, other issues may have
seemed more immediate, but these questions persist. Parts of the an-
swer may lie in a purblind anti-Communism, in the illusion of American
omnipotence, and in the force of American self-righteousness. Other
answers may lie in the cultural gap across the Pacific and our underesti-
mation of the difficulties involved; and still other answers may suggest
themselves to attentive readers of the record that follows. A partial
answer is perhaps all we shall have in our time.

THE CHINA WHITE PAPER

United States Relations With

With Special Reference
to the Period 1944-1949

BASED ON THE FILES OF THE DEPARTMENT OF STATE

Letter of Transmittal

Department of State
Washington, July SO , 1949

The President: In accordance with your wish, I have had com-
piled a record of our relations with China, special emphasis being
placed on the last five years. This record is being published and will
therefore be available to the Congress and to the people of the United
States.

Although the compilation is voluminous, it necessarily covers a
relatively small part of the relations between China and the United
States. Since the beginning of World War II, these relations have
involved many Government departments and agencies. The prepara-
tion of the full historical record of that period is by no means yet
complete. Because of the great current interest in the problems con-
fronting China, I have not delayed publication until the complete
analysis could be made of the archives of the National Military Estab-
lishment, the Treasury Department, the Lend-Lease Administration,
the White House files and many other official sources. However, I
instructed those charged with the compilation of this document to
present a record which would reveal the salient facts which determined
our policy toward China during this period and which reflect the
execution of that policy. This is a frank record of an extremely com-
plicated and most unhappy period in the life of a great country to
which the United States has long been attached by ties of
closest friendship. No available item has been omitted because
it contains statements critical of our policy or might be the basis of
future criticism. The inherent strength of our system is the respon-
siveness of the Government to an informed and critical public opinion.
It. is precisely this informed and critical public opinion which totali-
tarian governments, whether Rightist or Communist, cannot endure
and do not tolerate.

The interest of the people and the Government of the United States
in China goes far back into our history. Despite the distance and
broad differences in background which separate China and the United
States, our friendship for that country has always been intensified by

m

IV

LETTER OF TRANSMITTAL

the religious, philanthropic and cultural ties which have united the
two peoples, and has been attested by many acts of good will over a
period of many years, including the use of the Boxer indemnity for
the education of Chinese students, the abolition of extraterritoriality
during the Second World War, and our extensive aid to China dur-
ing and since the close of the war. The record shows that the United
States has consistently maintained and still maintains those funda-
mental principles of our foreign policy toward China which include
the doctrine of the Open Door, respect for the administrative and
territorial integrity of China, and opposition to any foreign domina-
tion of China. It is deplorable that respect for the truth in the
compilation of this record makes it necessary to publish an account of
facts which reveal the distressing situation in that country. I have
not felt, however, that publication could be withheld for that reason.

The record should be read in the light of conditions prevailing when
the events occurred. It must not be forgotten, for example, that
throughout World War II we were allied with Russia in the struggle
to defeat Germany and Italy, and that a prime object of our policy
was to bring Russia into the struggle against Japan in time to be of
real value in the prosecution of the war. In this period, military
considerations were understandably predominant over all others. Our
most urgent purpose in the Far East was to defeat the common enemy
and save the lives of our own men and those of our comrades-in-arms,
the Chinese included. We should have failed in our manifest duty
had we pursued any other course.

In the years since V-J Day, as in the years before Pearl Harbor,
military considerations have been secondary to an earnest desire on our
part to assist the Chinese people to achieve peace, prosperity and in-
ternal stability. The decisions and actions of our Government to pro-
mote these aims necessarily were taken on the basis of information
available at the time. Throughout this tragic period, it has been fully
realized that the material aid, the military and technical assistance,
and the good will of the United States, however abundant, could not
of themselves put China on her feet. In the last analysis, that can be
done only by China herself.

Two factors have played a major role in shaping the destiny of
modern China.

The population of China during the eighteenth and nineteenth cen-
turies doubled, thereby creating an unbearable pressure upon the land.
The first problem which every Chinese Government has had to face
is that of feeding this population. So far none has succeeded. The
Kuomintang attempted to solve it by putting many land-reform laws
on the statute books. Some of these laws have failed, others have

LETTER OF TRANSMITTAL

V

been ignored. In no small measure, the predicament in which the
National Government finds itself today is due to its failure to provide
China with enough to eat. A large part of the Chinese Communists’
propaganda consists of promises that they will solve the land problem.

The second major factor which has shaped the pattern of contem-
porary China is the impact of the West and of Western ideas. For
more than three thousand years the Chinese developed their own high
culture and civilization, largely untouched by outside influences. Even
when subjected to military conquest the Chinese always managed in
the end to subdue and absorb the invader. It was natural therefore
that they should come to look upon themselves as the center of the
world and the highest expression of civilized mankind. Then in the
middle of the nineteenth century the heretofore impervious wall of
Chinese isolation was breached by the West. These outsiders brought
with them aggressiveness, the unparalleled development of Western
technology, and a high order of culture which had not accompanied
previous foreign incursions into China. Partly because of these
qualities and partly because of the decay of Manchu rule, the
Westerners, instead of being absorbed by the Chinese, introduced new
ideas which played an important part in stimulating ferment and
unrest.

By the beginning of the twentieth century, the combined force of
overpopulation and new ideas set in motion that chain of events which
can be called the Chinese revolution. It is one of the most imposing
revolutions in recorded history and its outcome and consequences
are yet to be foreseen. Out of this revolutionary whirlpool emerged
the Kuomintang, first under the leadership of Dr. Sun Yat-sen, and
later Generalissimo Chiang Kai-shek, to assume the direction of the
revolution. The leadership of the Kuomintang was not challenged
until 1927 by the Chinese Communist party which had been organized
in the early twenties under the ideological impetus of the Russian
revolution. It should be remembered that Soviet doctrine and prac-
tice had a measurable effect upon the thinking and principles of
Dr. Sun Yat-sen, particularly in terms of economics and party or-
ganization, and that the Kuomintang and the Chinese Communists
cooperated until 1927 when the Third International demanded a pre-
dominant position in the Government and the army. It was this de-
mand which precipitated the break between the two groups. To a
large extent the history of the period between 1927 and 1937 can be
written in terms of the struggle for power between the Kuomintang
and the Chinese Communists, with the latter apparently fighting a
losing battle. During this period the Kuomintang made considerable
progress in its efforts to unify the country and to build up the nation’s

VI

LETTER OF TRANSMITTAL

financial and economic strength. Somewhere during this decade,
however, the Kuomintang began to lose the dynamism and revolu-
tionary fervor which had created it, while in the Chinese Communists
the fervor became fanaticism.

Perhaps largely because of the progress being made in China, the
Japanese chose 1937 as the departure point for the conquest of China
proper, and the goal of the Chinese people became the expulsion of
a brutal and hated invader. Chinese resistance against Japan dur-
ing the early years of the war compelled the unqualified admiration
of freedom-loving peoples throughout the world. Until 1940 this
resistance was largely without foreign support. The tragedy of these
years of war was that physical and human devastation to a large ex-
tent destroyed the emerging middle class which historically has been
the backbone and heart of liberalism and democracy.

In contrast also to the unity of the people of China in the war
against Japan were the divided interests of the leaders of the Kuo-
mintang and of the Chinese Communists. It became apparent in the
early forties that the leaders of the Government, just as much as the
Communist leaders, were still as preoccupied with the internal
struggle for power as they were with waging war against Japan.
Once the United States became a participant in the war, the Kuomin-
tang was apparently convinced of the ultimate defeat of Japan and
saw an opportunity to improve its position for a show-down struggle
with the Communists. The Communists, for their part, seemed to
see in the chaos of China an opportunity to obtain that which had
been denied them before the Japanese war, namely, full power in
China. This struggle for power in the latter years of the war con-
tributed largely to the partial paralysis of China’s ability to resist.

It was precisely here that two of the fundamental principles of
United States policy in regard to China — noninterference in its in-
ternal affairs and support of its unity and territorial integrity — came
into conflict and that one of them also conflicted with the basic in-
terests of the Allies in the war against J apan. It seemed highly prob-
able in 1943 and 1944 that, unless the Chinese could subordinate their
internal interests to the larger interest of the unified war effort
against Japan, Chinese resistance would become completely ineffective
and the Japanese would be able to deprive the Allies of valuable bases,
operating points and manpower in China at a time when the outcome
of the war against Japan was still far from clear. In this situation
and in the light of the paramount necessity of the most vigorous prose-
cution of the war, in which Chinese interests were equally at stake
with our own, traditional concepts of policy had to be adapted to a new
and unprecedented situation.

LETTER OF TRANSMITTAL

VII

After Pearl Harbor we expanded the program of military and
economic aid which we had inaugurated earlier in 1941 under the
Lend-Lease Act. That program, described in chapter I of the at-
tached record, was far from reaching the volume which we would
have wished because of the tremendous demands on the United States
from all theaters of a world-wide war and because of the difficulties
of access to a China all of whose ports were held by the enemy. Never-
theless it was substantial.

Representatives of our Government, military and civilian, who were
sent to assist the Chinese in prosecuting the war soon discovered that,
as indicated above, the long struggle had seriously weakened the
Chinese Government not only militarily and economically, but also
politically and in morale. The reports of United States military and
diplomatic officers reveal a growing conviction through 1943 and 1944
that the Government and the Kuomintang had apparently lost the
crusading spirit that won them the people’s loyalty during the early
years of the war. In the opinion of many observers they had sunk
into corruption, into a scramble for place and power, and into reliance
on the United States to win the war for them and to preserve their
own domestic supremacy. The Government of China, of course, had
always been a one-party rather than a democratic government in the
Western sense. The stresses and strains of war were now rapidly
weakening such liberal elements as it did possess and strengthening
the grip of the reactionaries who were indistinguishable from the
war lords of the past. The mass of the Chinese people were coming
more and more to lose confidence in the Government.

It was evident to us that only a rejuvenated and progressive Chinese
Government which could recapture the enthusiastic loyalty of the
people could and would wage an effective war against Japan. Amer-
ican officials repeatedly brought their concern with this situation to
the attention of the Generalissimo and he repeatedly assured them that
it would be corrected. He made, however, little or no effective effort
to correct it and tended to shut himself off from Chinese officials who
gave unpalatable advice. In addition to a concern over the effect
which this atrophy of the central Chinese administration must have
upon the conduct of the war, some American observers, whose reports
are also quoted in the attached record, were concerned over the effect
which this deterioration of the Kuomintang must have on its eventual
struggle, whether political or military, with the Chinese Communists.
These observers were already fearful in 1943 and 1944 that the Na-
tional Government might be so isolating itself from the people that
in the postwar competition for power it would prove itself impotent

VIII

LETTER OF TRANSMITTAL

to maintain its authority. Nevertheless, we continued for obvious
reasons to direct all our aid to the National Government.

This was of course the period during which joint prosecution of
the war against Nazi Germany had produced a degree of cooperation
between the United States and Russia. President Roosevelt was de-
termined to do what he could to bring about a continuance in the post-
war period of the partnership forged in the fire of battle. The peoples
of the world, sickened and weary with the excesses, the horrors, and the
degradation of the war, shared this desire. It has remained for the
postwar years to demonstrate that one of the major partners in
this world alliance seemingly no longer pursues this aim, if indeed
it ever did.

When Maj. Gen. Patrick J. Hurley was sent by President Roosevelt
to Chungking in 1944 he found what he considered to be a willingness
on the part of the National Government and the Chinese Communists
to lay aside their differences and cooperate in a common effort. Al-
ready they had been making sporadic attempts to achieve this result.

Previously and subsequently, General Hurley had been assured by
Marshal Stalin that Russia had no intention of recognizing any
government in China except the National Government with Chiang
Kai-shek as its leader. It may be noted that during the late war years
and for a time afterwards Marshal Stalin reiterated these views to
American officials. He and Molotov expressed the view that China
should look to the United States as the principal possible source of
aid. The sentiments expressed by Marshal Stalin were in large part
incorporated in the Sino-Soviet treaty of 1945.

From the wartime cooperation with the Soviet Union and from the
costly campaigns against the Japanese came the Yalta Agreement.
The American Government and people awaited with intense anxiety
the assault on the main islands of J apan which it was feared would cost
up to a million American casualties before Japan was conquered.
The atomic bomb was not then a reality and it seemed impossible that
the war in the Far East could be ended without this assault. It thus
became a primary concern of the American Government to see to it that
the Soviet Union enter the war against Japan at the earliest possible
date in order that the Japanese Army in Manchuria might not be
returned to the homeland at the critical moment. It was considered
vital not only that the Soviet Union enter the war but that she do
so before our invasion of Japan, which already had been set for the
autumn of 1945.

At Yalta, Marshal Stalin not only agreed to attack Japan within
two or three months after V-E Day but limited his “price” with refer-
ence to Manchuria substantially to the position which Russia had

LETTER OF TRANSMITTAL

IX

occupied there prior to 1904. We for our part, in order to obtain this
commitment and thus to bring the war to a close with a consequent
saving of American, Chinese and other Allied lives, were prepared to
and did pay the requisite price. Two facts must not, however, be
lost sight of in this connection. First, the Soviet Union when she
finally did enter the war against Japan, could in any case have seized
all the territories in question and considerably more regardless of what
our attitude might have been. Second, the Soviets on their side in the
Sino-Soviet Treaty arising from the Yalta Agreement, agreed to give
the National Government of China moral and material support and
moreover formalized their assurances of noninterference in China’s in-
ternal affairs. Although the unexpectedly early collapse of Japanese
resistance later made some of the provisions of the Yalta Agreement
seem unnecessary, in the light of the predicted course of the war at
that time they were considered to be not only justified but clearly
advantageous. Although dictated by military necessity, the Agree-
ment and the subsequent Sino-Soviet Treaty in fact imposed limita-
tions on the action which Russia would, in any case, have been in a
position to take.

For reasons of military security, and for those ohly, it was con-
sidered too dangerous for the United States to consult with the Na-
tional Government regarding the Yalta Agreement or to communicate
its terms at once to Chungking. We were then in the midst of the
Pacific War. It was felt that there was grave risk that secret informa-
tion transmitted to the Nationalist capital at this time would become
available to the Japanese almost immediately. Under no circum-
stances, therefore, would we have been justified in incurring the secur-
ity risks involved. It was not until June 15, 1945, that General Hurley
was authorized to inform Chiang Kai-shek of the Agreement.

In conformity with the Russian agreement at Yalta to sign a treaty
of friendship and alliance with Nationalist China, negotiations be-
tween the two nations began in Moscow in July 1945. During their
course, the United States felt obliged to remind both parties that the
purpose of the treaty was to implement the Yalta Agreement — no
more, no less — and that some of the Soviet proposals exceeded its pro-
visions. The treaty, which was signed on August 14, 1945, was greeted
with general satisfaction both in Nationalist China and in the United
States. It was considered that Russia had accepted definite limita-
tions on its activities in China and was committed to withhold all
aid from the Chinese Communists. On September 10, however, our
embassy in Moscow cautioned against placing undue confidence in the
Soviet observance of either the spirit or letter of the treaty. The

X

LETTER OF TRANSMITTAL

subsequent conduct of the Soviet Government in Manchuria has amply
justified this warning.

When peace came the United States was confronted with three
possible alternatives in China : (1) it could have pulled out lock, stock
and barrel; (2) it could have intervened militarily on a major scale
to assist the Nationalists to destroy the Communists ; (3) it could, while
assisting the Nationalists to assert their authority over as much of
China as possible, endeavor to avoid a civil war by working for a
compromise between the two sides.

The first alternative would, and I believe American public opinion
at the time so felt, have represented an abandonment of our inter-
national responsibilities and of our traditional policy of friendship
for China before we had made a determined effort to be of assistance.
The second alternative policy, while it may look attractive theoreti-
cally and in retrospect, was wholly impracticable. The Nationalists
had been unable to destroy the Communists during the 10 years
before the war. Now after the war the Nationalists were, as indicated
above, weakened, demoralized, and unpopular. They had quickly
dissipated their popular support and prestige in the areas liberated
from the Japanese by the conduct of their civil and military officials.
The Communists on the other hand were much stronger than they had
ever been and were in control of most of North China. Because of
the ineffectiveness of the Nationalist forces which was later to be tragi-
cally demonstrated, the Communists probably could have been dis-
lodged only by American arms. It is obvious that the American people
would not have sanctioned such a colossal commitment of our armies in
1945 or later. We therefore came to the third alternative policy
whereunder we faced the facts of the situation and attempted to
assist in working out a modus vivendi which would avert civil war but
nevertheless preserve and even increase the influence of the National
Government.

As the record shows, it was the Chinese National Government itself
which, prior to General Hurley’s mission, had taken steps to arrive
at a working agreement with the Communists. As early as September
1943 in addressing the Kuomintang Central Executive Committee,
the Generalissimo said, “we should clearly recognize that the Commu-
nist problem is a purely political problem and should be solved by
political means.” He repeated this view on several occasions. Com-
prehensive negotiations between representatives of the Government
and of the Communists, dealing with both military cooperation and
civil administration, were opened in Sian in May 1944. These nego-
tiations, in which Ambassador Hurley later assisted at the invitation
of both parties between August 1944 and September 1945, continued

LETTER OF TRANSMITTAL

XI

intermittently during a year and a half without producing conclusive
results and culminated in a comprehensive series of agreements on
basic points on October 11, 1945, after Ambassador Hurley’s departure
from China and before General Marshall’s arrival. Meanwhile, how-
ever, clashes between the armed forces of the two groups were increas-
ing and were jeopardizing the fulfillment of the agreements. The
danger of wide-spread civil war, unless the negotiations could
promptly be brought to a successful conclusion, was critical. It was
under these circumstances that General Marshall left on his mission to
China at the end of 1945.

As the account of General Marshall’s mission and the subsequent
years in chapters V and VI of the underlying record reveals, our
policy at that time was inspired by the two objectives of bringing
peace to China under conditions which would permit stable govern-
ment and progress along democratic lines, and of assisting the Na-
tional Government to establish its authority over as wide areas of
China as possible. As the event proved, the first objective was unreal-
izable because neither side desired it to succeed: the Communists
because they refused to accept conditions which would weaken their
freedom to proceed with what remained consistently their aim, the
communization of all China; the Nationalists because they cherished
the illusion, in spite of repeated advice to the contrary from our mili-
tary representatives, that they could destroy the Communists by
force of arms.

The second objective of assisting the National Government, how-
ever, we pursued vigorously from 1945 to 1949. The National Gov-
ernment was the recognized government of a friendly power. Our
friendship, and our right under international law alike, called for aid
to the Government instead of to the Communists who were seeking to
subvert and overthrow it. The extent of our aid to Nationalist China
is set forth in detail in chapters V, VI, VII and VIII of the record and
need not be repeated here. The National Government had in 1945,
and maintained until the early fall of 1948, a marked superiority in
manpower and armament over their rivals. Indeed during that
period, thanks very largely to our aid in transporting, arming and
supplying their forces, they extended their control over a large part
of North China and Manchuria. By the time General Marshall left
China at the beginning of 1947, the Nationalists were apparently at
the very peak of their military successes and territorial expansion.
The following year and a half revealed, however, that their seeming
strength was illusory and that their victories were built on sand.

The crisis had developed around Manchuria, traditional focus of
Bussian and Japanese imperialism. On numerous occasions, Mar-

XII

LETTER OF TRANSMITTAL

shal Stalin had stated categorically that he expected the National
Government to take over the occupation of Manchuria. In the truce
agreement of January 10, 1946, the Chinese Communists agreed to
the movement of Government troops into Manchuria for the purpose
of restoring Chinese sovereignty over this area. In conformity with
this understanding the United States transported sizable government
armies to the ports of entry into Manchuria. Earlier the Soviet Army
had expressed a desire to evacuate Manchuria in December 1945, but
had remained an additional two or three months at the request of the
Chinese Government. When the Russian troops did begin their
evacuation, the National Government found itself with extended lines
of communications, limited rolling stock and insufficient forces to
take over the areas being evacuated in time to prevent the entry of
Chinese Communist forces, who were already in occupation of the
countryside. As the Communists entered, they obtained the large
stocks of materiel from the Japanese Kwantung Army which the Rus-
sians had conveniently “abandoned.” To meet this situation the
National Government embarked on a series of military campaigns
which expanded the line of its holdings to the Sungari River. Toward
the end of these campaigns it also commenced hostilities within North
China and succeeded in constricting the areas held by the Communists.

In the spring of 1946 General Marshall attempted to restore peace.
This effort lasted for months and during its course a seemingly end-
less series of proposals and counterproposals were made which had
little effect upon the course of military activities and produced no
political settlement. During these negotiations General Marshall
displayed limitless patience and tact and a willingness to try and
then try again in order to reach agreement. Increasingly he became
convinced, however, that twenty years of intermittent civil war be-
tween the two factions, during which the leading figures had remained
the same, had created such deep personal bitterness and such irrecon-
cilable differences that no agreement was possible. The suspicions
and the lack of confidence were beyond remedy. He became con-
vinced that both parties were merely sparring for time, jockeying for
military position and catering temporarily to what they believed to
be American desires. General Marshall concluded that there was
no hope of accomplishing the objectives of his mission.

Even though for all practical purposes General Marshall, by the fall
of 1946, had withdrawn from his efforts to assist in a peaceful settle-
ment of the civil war, he remained in China until January 1947. One
of the critical points of dispute between the Government and the
Communists had been the convocation of the National Assembly to
write a new constitution for China and to bring an end to the period

LETTER OF TRANSMITTAL

XIII

of political tutelage and of one-party government. The Communists
had refused to participate in the National Assembly unless there
were a prior military settlement. The Generalissimo was determined
that the Assembly should be held and the program carried out. It
was the hope of General Marshall during the late months of 1946
that his presence in China would encourage the liberal elements in
non-Communist China to assert themselves more forcefully than they
had in the past and to exercise a leavening influence upon the abso-
lutist control wielded by the reactionaries and the militarists. General
Marshall remained in China until the Assembly had completed its
work. Even though the proposed new framework of government
appeared satisfactory, the evidence suggested that there had been
little shift in the balance of power.

In his farewell statement, General Marshall announced the termina-
tion of his efforts to assist the Chinese in restoring internal peace. He
described the deep-seated mutual suspicion between the Kuomin-
tang and the Chinese Communist Party as the greatest obstacle to a
settlement. He made it clear that the salvation of China lay in the
hands of the Chinese themselves and that, while the newly adopted
constitution provided the framework for a democratic China, practical
measures of implementation by both sides would be the decisive test.
He appealed for the assumption of leadership by liberals in and out
of the Government as the road to unity and peace. With these final
words he returned to Washington to assume, in January 1947, his
new post as Secretary of State.

As the signs of impending disaster multiplied, the President in July
1947, acting on the recommendation of the Secretary of State, in-
structed Lt. Gen. Albert C. Wedemeyer to survey the Chinese scene
and make recommendations. In his report, submitted on September
19, 1947, the General recommended that the United States continue and
expand its policy of giving aid to Nationalist China, subject to these
stipulations :

1. That China inform the United Nations of her request for aid.

2. That China request the United Nations to bring about a truce in
Manchuria and request that Manchuria be placed under a Five-Power
guardianship or a trusteeship.

3. That China utilize her own resources, reform her finances, her
Government and her armies, and accept American advisers in the
military and economic fields.

General Wedemeyer’s report, which fully recognized the danger of
Communist domination of all China and was sympathetic to the prob-
lems of the National Government, nevertheless listed a large number

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LETTER OF TRANSMITTAL

of reforms which he considered essential if that Government were
to rehabilitate itself.

It was decided that the publication at that time of a suggestion for
the alienation of a part of China from the control of the National
Government, and for placing that part under an international ad-
ministration to include Soviet Russia, would not be helpful. In this
record, the full text of that part of General Wedemeyer’s report which
deals with China appears as an annex to chapter VI.

The reasons for the failures of the Chinese National Government
appear in some detail in the attached record. They do not stem from
any inadequacy of American aid. Our military observers on the spot
have reported that the Nationalist armies did not lose a single battle
during the crucial year of 1948 through lack of arms or ammunition.
The fact was that the decay which our observers had detected in
Chungking early in the war had fatally sapped the powers of resist-
ance of the Kuomintang. Its leaders had proved incapable of meeting
the crisis confronting them, its troops had lost the will to fight, and
its Government had lost popular support. The Communists, on the
other hand, through a ruthless discipline and fanatical zeal, attempted
to sell themselves as guardians and liberators of the people. The
Nationalist armies did not have to be defeated; they disintegrated.
History has proved again and again that a regime without faith in
itself and an army without morale cannot survive the test of battle.

The record obviously can not set forth in equal detail the inner
history and development of the Chinese Communist Party during these
years. The principal reason is that, while we had regular diplomatic
relations with the National Government and had the benefit of volu-
minous reports from our representatives in their territories, our direct
contact with the Communists was limited in the main to the mediation
efforts of General Hurley and General Marshall.

Fully recognizing that the heads of the Chinese Communist Party
were ideologically affiliated with Moscow, our Government neverthe-
less took the view, in the light of the existing balance of forces in
China, that peace could be established only if certain conditions were
met. The Kuomintang would have to set its own house in order and
both sides would have to make concessions so that the Government of
China might become, in fact as well as in name, the Government of all
China and so that all parties might function within the constitutional
system of the Government. Both internal peace and constitutional
development required that the progress should be rapid from one
party government with a large opposition party in armed rebellion,
to the participation of all parties, including the moderate non-com-
munist elements, in a truly national system of government.

LETTER OF TRANSMITTAL

XV

None of these conditions has been realized. The distrust of the
leaders of both the Nationalist and Communist Parties for each other
proved too deep-seated to permit final agreement, notwithstanding
temporary truces and apparently promising negotiations. The Na-
tionalists, furthermore, embarked in 1946 on an over-ambitious mili-
tary campaign in the face of warnings by General Marshall that it
not only would fail but would plunge China into economic chaos and
eventually destroy the National Government. General Marshall
pointed out that though Nationalist armies could, for a period, cap-
ture Communist-held cities, they could not destroy the Communist
armies. Thus every Nationalist advance would expose their commu-
nications to attack by Communist guerrillas and compel them to retreat
or to surrender their armies together with the munitions which the
United States has furnished them. No estimate of a military situation
has ever been more completely confirmed by the resulting facts.

The historic policy of the United States of friendship and aid
toward the people of China was, however, maintained in both peace
and war. Since V-J Day, the United States Government has author-
ized aid to Nationalist China in the form of grants and credits totaling
approximately 2 billion dollars, an amount equivalent in value to
more than 50 percent of the monetary expenditures of the Chinese
Government and of proportionately greater magnitude in relation to
the budget of that Government than the United States has provided
to any nation of Western Europe since the end of the war. In addition
to these grants and credits, the United States Government has sold
the Chinese Government large quantities of military and civilian war
surplus property with a total procurement cost of over 1 billion
dollars, for which the agreed realization to the United States was
232 million dollars. A large proportion of the military supplies fur-
nished the Chinese armies by the United States since Y-J Day has,
however, fallen into the hands of the Chinese Communists through the
military ineptitude of the Nationalist leaders, their defections and
surrenders, and the absence among their forces of the will to fight.

It has been urged that relatively small amounts of additional aid —
military and economic — to the National Government would have
enabled it to destroy communism in China. The most trustworthy
military, economic, and political information available to our Govern-
ment does not bear out this view.

A realistic appraisal of conditions in China, past and present, leads
to the conclusion that the only alternative open to the United States
was full-scale intervention in behalf of a Government which had lost
the confidence of its own troops and its own people. Such inter-
vention would have required the expenditure of even greater sums

XVI

LETTER OF TRANSMITTAL

than have been fruitlessly spent thus far, the command of Nationalist
armies by American officers, and the probable participation of Ameri-
can armed forces — land, sea, and air — in the resulting war. Inter-
vention of such a scope and magnitude would have been resented by
the mass of the Chinese people, would have diametrically reversed
our historic policy, and would have been condemned by the American
people.

It must be admitted frankly that the American policy of assisting
the Chinese people in resisting domination by any foreign power or
powers is now confronted with the gravest difficulties. The heart
of China is in Communist hands. The Communist leaders have fore-
sworn their Chinese heritage and have publicly announced their sub-
servience to a foreign power, Russia, which during the last 50 years,
under czars and Communists alike, has been most assiduous in its
efforts to extend its control in the Far East. In the recent past,
attempts at foreign domination have appeared quite clearly to the
Chinese people as external aggression and as such have been bitterly
and in the long run successfully resisted. Our aid and encouragement
have helped them to resist. In this case, however, the foreign domina-
tion has been masked behind the fagade of a vast crusading movement
which apparently has seemed to many Chinese to be wholly indigenous
and national. Under these circumstances, our aid has been unavailing.

The unfortunate but inescapable fact is that the ominous result of
the civil war in China was beyond the control of the government of
the United States. Nothing that this country did or could have done
within the reasonable limits of its capabilities could have changed that
result; nothing that was left undone by this country has contributed
to it. It was the product of internal Chinese forces, forces which this
country tried to influence but could not. A decision was arrived at
within China, if only a decision by default.

And now it is abundantly clear that we must face the situation as
it exists in fact. We will not help the Chinese or ourselves by basing
our policy on wishful thinking. We continue to believe that, however
tragic may be the immediate future of China and however ruthlessly
a major portion of this great people may be exploited by a party in the
interest of a foreign imperialism, ultimately the profound civilization
and the democratic individualism of China will reassert themselves
and she will throw off the foreign yoke. I consider that we should
encourage all developments in China which now and in the future
work toward this end.

In the immediate future, however, the implementation of our his-
toric policy of friendship for China must be profoundly affected by
current developments. It will necessarily be influenced by the degree

LETTER OF TRANSMITTAL

XVII

to which the Chinese people come to recognize that the Communist
regime serves not their interests but those of Soviet Russia and the
manner in which, having become aware of the facts, they react to this
foreign domination. One point, however, is clear. Should the Com-
munist regime lend itself to the aims of Soviet Russian imperialism
and attempt to engage in aggression against China’s neighbors, we
and the other members of the United Nations would be confronted by
a situation violative of the principles of the United Nations Charter
and threatening international peace and security.

Meanwhile our policy will continue to be based upon our own respect
for the Charter, our friendship for China, and our traditional support
for the Open Door and for China’s independence and administrative
and territorial integrity.

Respectfully yours,

Dean Acheson

Contents

Page.

Letter of Transmittal hi

Chronology of Principal Events Affecting Sino-American
Relations xxxvn

CHAPTER I

A Century of American Policy , 1844-1948

I. Introduction 1

II. Development of Basic American Policy 1

Equality of Commercial Opportunity 1

Enunciation of the Open Door Policy 2

Early Efforts to Maintain the Open Door 3

The Root-Takahira Agreement, 1908 5

The Knox “Neutralization” Proposals, 1909 ... 5

III. World War I and Post-War Settlements 6

Hostilities in China 6

The Twenty-one Demands, 1915 7

The Lansing-Ishii Agreement, November 2, 1917 . . 8

Settlement of the Shantung Question 9

The Nine-Power Treaty, February 6, 1922 10

IV. Non-Interference in Chinese Internal Affairs — The

Washington Conference and After 10

Statement by Secretary Kellogg, January 27, 1927 . 11

Recognition of the National Government, 1928 ... 12

V. The Sino-Soviet Dispute in 1929 12

VI. Japanese Expansion into China from 1931 13

The Non-Recognition Doctrine of Secretary Stimson . 13

Defense of American Treaty Rights in China .... 15

Statement by Secretary Hull, December 5, 1935 . . 17

VII. The Japanese Undeclared War of 1937 18

The “Quarantine” Speech of President Roosevelt,

October 5, 1937 19

Defense of the Principle of the Open Door 19

Defense of Chinese Integrity 23

United States Support of Chinese Resistance .... 24

American-Japanese Informal Conversations in 1941 . . 25

XIX

XX

CONTENTS

Page

VIII. World War II 26

The LeDd-Lease Program, 1941-1943 26

Military Aid, 1941-1943 28

Financial Aid, 1937-1943 31

Relinquishment of American Extraterritoriality in

China 34

Repeal of Chinese Exclusion Acts, 1943 37

American Acknowledgment of China as a Great

Power 37

CHAPTER II

A Review of Kuomintang-Chinese Communist Relations , 1921-1944

I. Introduction 38

II. Basic Factors 38

The Kuomintang Program 38

The Communist Program 40

Foundation of the Communist Party, 1921 41

Reorganization of the Kuomintang, 1924 42

III. Kuomintang-Communist Collaboration, 1924-1927 . . 43

IV. Civil War, 1927-1936 44

V. The Kuomintang-Communist Entente, 1937—1944 ... 45

Background of the Entente 45

Third Plenary Session of the Kuomintang Central

Executive Committee, 1937 48

Manifesto of the Chinese Communist Party, Septem-
ber 22, 1937 50

Statement by Generalissimo Chiang Kai-shek, Sep-
tember 23, 1937 51

Implementation of the Agreements, 1937-1938 ... 51

Deterioration of Kuomintang-Communist Relations,

1938-1941 52

Kuomintang-Communist Negotiations, 1941-1944 . . 53

The Wallace Mission, 1944 55

Conclusion 57

CHAPTER III

The Ambassadorship of Major General Patrick J. Hurley ,
1944-1945

I. Immediate Background of the Hurley Mission .... 59

Introduction 59

Chinese Unity and the War Effort 61

CONTENTS XXI

Page

I. Immediate Background of the Hurley Mission — Con.

Pessimism of Ambassador Gauss 64

The Military Factor 65

President Roosevelt's Messages to Generalissimo

Chiang Kai-shek, July-August 1944 66

Reports by General Stilwell 68

General Hurley’s Instructions 71

General Hurley’s Talk with Mr. Molotov 71

II. The Effort at Mediation 73

Initial Steps 73

The Five-Point Draft Agreement, November 10, 1944 . 74

The Three-Point Plan 75

Reply of the Chinese Communists 75

The Conference at Chungking 73

The National Government's Proposal 78

The Communist Party's Reaction 79

Conference with the Generalissimo 80

Summary of Kuomintang Views 81

Adjournment of the Conference 82

The Generalissimo’s Statement of March 1, 1945 . . 83

The Communist Party’s Reply, March 9, 1945 ... 84

III. The Problem of Military Assistance 86

Ambassador Hurley’s Recommendation against Amer-
ican Aid to the Chinese Communists 86

The American Charge’s Recommendations 87

IV. China and the Soviet Union 92

Agenda for Dr. Soong’s Moscow Conversations ... 92

Ambassador Hurley’s Interview with Marshal Stalin,

April 15, 1945 94

Comments on Ambassador Hurley’s Report .... 96

Ambassador Hurley’s Review of Sovdet-Chinese

Communist Relations 99

V. Further Government-Communist Negotiations .... 100

Sixth Kuomintang Congress, May 1945 100

The Committee of Seven 102

Ambassador Hurley's Departure 105

Continuing Negotiations at Chungking 107

Clashes between Communist and National Troops . . 110

Postponement of the Political Consultative Con-
ference no

VT. The Resignation of Ambassador Hurley 112

XXII

CONTENTS

CHAPTER IV

The Yalta Agreement and the Sino-Soviet Treaty of 1945

Page

I. The Yalta Agreement, February 11, 1945 113

Text of the Agreement 113

Discussions at Yalta 114

Soviet Views on the Agreement 115

II. The Sino-Soviet Treaty of Friendship and Alliance, Au-
gust 14, 1945 116

Negotiation of the Treaty 116

Assurances on the Open Door 118

Chinese Reaction to the Treaty 120

United States Reaction to the Treaty 121

Soviet Attitude Toward Manchurian Industries ... 123

Discussions at the Moscow Conference, 1945 .... 124

American Protests on Dairen 125

Conclusion 126

CHAPTER V

The Mission of General George C. Marshall , 1945-194-7

I. The Economic, Military and Political Setting 127

Introduction 127

General Economic Situation Immediately afber V-J

Day 127

China’s Financial Position 129

Unfavorable Elements 130

General Wedemeyer’s Reports 131

General Marshall’s Appointment and Instructions . . 132

The President’s Policy Statement of December 15,

1945 133

The Beginning of the Marshall Mission 133

Recapitulation of Chinese Political Background for the

Mission 134

II. The Agreements of January and February 1946 .... 136

The Cease-Fire Agreement of January 10, 1946 . . . 136

The Political Consultative Conference 138

The PCC Resolutions 139

The Military Reorganization Agreement of February

25, 1946 140

Chinese Public Reaction 143

Kuomintang Action on the PCC Resolutions .... 144

General Marshall’s Recall for Consultation 145

CONTENTS

XXIII

Page

III. The Manchurian Crisis 145

Field Teams for Manchuria 145

Chinese Communist Occupation of Changchun . . . 149

General Marshall’s Appraisal of the Situation ... 150

General Marshall’s Temporary Withdrawal from

Mediation 152

Suggested Compromise Solution 153

National Government Capture of Changchun .... 155

Generalissimo Chiang’s Proposals of May 24, 1946 . 156

Arrangements for a Truce 158

Negotiations during the Truce Period 159

Cessation of Hostilities in Manchuria 162

Revision of the Military Reorganization Agreement

and Related Political Problems 162

General Marshall’s Draft Agreement on the Army

Reorganization Plan 166

Disintegration of the Truce Arrangement 170

IV. The Appointment of J. Leighton Stuart as Ambassa-

dor to China 173

V. Organization of the State Council 174

Proposal for a Five-Man Committee 174

The Marshall-Stuart Statement of August 10, 1946 . 175

Generalissimo Chiang Kai-shek’s Position 177

Major Factors of Disagreement 177

VI. The Truman-Chiang Messages of August 1946 .... 179

President Truman’s Message of August 10 179

Generalissimo Chiang’s Reply of August 28 179

President Truman’s Message of August 31 179

VII. The Drift toward All-Out Strife 180

Communist Resentment of American Aid to China . 180

Problems Relating to the Five-Man Committee . . . 181

Neither Side Yields Measurably 184

National Government Military Activities 188

Further Deterioration in the Negotiations 188

General Marshall Considers Withdrawing 189

The Kalgan Truce Proposal 193

The Marshall-Stuart Statement of October 8, 1946 . . 194

The Communist Position 194

Generalissimo Chiang’s Statement of October 10, 1946 . 196

The Fall of Kalgan and the Summoning of the National

Assembly 196

Draft Statement Prepared for the Generalissimo . . . 197

XXIV

CONTENTS

VII. The Drift toward All-Out Strife — Continued

Eight-Point Proposal by the Generalissimo, October

16, 1946 198

The Communist Reply 199

The Spreading of Hostilities 200

Attempt at Mediation by the Third Party Group . . 201

Generalissimo Chiang's Statement of November 8,

1946 204

Cease-Fire Order by the National Government . . . 206

Convening of the National Assembly, November 15,

1946 207

The End of American Mediation 208

General Marshall's Views on the Situation in China . . 211

The Work of the National Assembly 214

The Communist Party's Reaction 215

VIII. The End of the Marshall Mission 217

General Marshall's Refusal to Continue as Mediator . 217

General Marshall's Recall and Final Statement ... 217

President Truman's Statement of December 18, 1946 . 218

American Withdrawal from the Committee of Three

and Executive Headquarters 219

Conclusion 219

IX. Economic Developments During the Marshall Mission . 220

Effects of Internal Conflict 220

Developments in China's Foreign Exchange and Trade

Policies 222

Effects of Restrictions on Trade and Shipping . . . 223

Economic Treaty Relations 223

Foreign Aid in 1946 225

CHAPTER VI

The Ambassadorship oj John Leighton Stuart , 19^7-19/^9

I. The Political and Military Situation 230

Further Efforts at Negotiation 230

Reversal of Communist Policy 232

The Soviet Proposal of March 10, 1947 233

Reorganization of the Legislative Yuan and the Con-
trol Yuan, March 1, 1947 233

Ambassador Stuart's Summary of Developments . . . 235

The Capture of Yenan 237

Student Demonstrations 238

Continued Deterioration of the Government's

Position 240

' CONTENTS XXV

Page

II. American Efforts to Encourage Reforms by the Chinese

Government 242

Ambassador Stuart’s Reports 242

Reorganization of the Executive Yuan and State

Council, April 17, 1947 244

The Political Situation in Manchuria 247

Chinese Moves toward Reform 249

The Communists Proclaimed to Be in Open Rebellion,

July 4, 1947 251

Secretary Marshall’s Message of July 6, 1947 .... 251

Ambassador Stuart’s Observations on North China

and Manchuria 252

III. The Wedemeyer Mission 255

Introduction 255

General Wedemeyer’s Instructions 255

Chinese Reaction to the Appointment 256

General Wedemeyer’s Statements of August 22 and

24, 1947 256

Chinese Reaction to General Wedemeyer’s State-
ments 258

Recommendations of the Wedemeyer Report .... 260

IY. Internal Developments in China 261

Fourth Plenary Session of the Kuomintang Central

Executive Committee 261

Ambassador Stuart’s Report of September 29, 1947 . . 263

Outlawing of the Democratic League, October 28,

1947 265

Possibility of Resumption of Peace Negotiations . . . 265

Elections to the National Assembly 268

Disturbances in Shanghai 269

V. Redefinition of American Policy 269

Considerations Underlying the Formulation of a Pro-
gram of Aid to China 269

Secretary Marshall’s Press Conference of March 10,

1948 • . . . 271

President Truman’s Press Conference of March 11,

1948 272

VI. Changes in the Chinese Government 273

Election of President Chiang and Vice President

Li Tsung-jen 273

The Search for a New Executive Yuan 274

Student Riots 277

Economic Reform Decrees of August 19, 1948 .... 278

XXVI

CONTENTS

Page

VII. Alternatives of American Policy 279

Secretary Marshall’s Policy Directives of August 12

and 13, 1948 279

Policy Review of October 1948 280

Chinese Requests for Further Military Assistance . . 286

VIII. Chinese Developments in 1949 288

President Chiang’s New Year’s Message 288

Prime Minister Sun Fo’s New Year’s Message . . . 290

Chinese Request for Foreign Mediation 290

The Retirement of the Generalissimo 292

The Position and Policies of Acting President Li . . 293

IX. Renewed Consideration of Additional American Aid . . 299

Recommendation from Tientsin 299

Comments by the Embassy Office at Canton . . . 300

Difficulties Confronting Acting President Li ... . 301

X. The Withdrawal of the Government from Nanking . . 304

The Communist Demands of April 15, 1949 .... 304

The Crossing of the Yangtze 305

XI. Formosa 307

CHAPTER VII

The Military Picture , 1945-1949

I. Military Operations 311

Operations in 1945 311

Operations in 1946 313

Operations in 1947 315

Operations in 1948 and 1949 318

II. American Operational Advice to the Chinese 323

Directives to General Barr on Advisory Activities . 323

General Barr’s Report 325

III. American Advisory Groups in China 338

Legislation and Agreements 338

The Joint Advisory Staff 340

The Naval Advisory Division 341

The Air Advisory Division 342

The Combined Service Forces Advisory Division . . 344

The Ground Forces Advisory Division 345

Comparison of Aid to China with Aid to Greece 351

CONTENTS

XXVII

IV. Military Materiel and Services Provided the Chinese

Government Since V-J Day

Summary

Secretary Marshall's Testimony on the 1946 Em-
bargo

American Equipment Captured by the Chinese Com-
munists

Adequacy of the Government's Military Supplies . .

CHAPTER VIII

The Program of American Economic Aid, 1947 -1949

I. The Economic Situation in 1947

Internal Economic Factors

Chinese Requests for American Aid

Consideration of Export-Import Bank Credits ....

Proposals for a Silver Loan

The Mounting Economic Crisis in China

II. Preparation in the United States of the China Aid Pro-
gram

Introduction

Secretary Marshall's Recommendations to Congress .
Premier Chang Chun's Request of November 17,

1947

The Chinese Request of November 21 and 24, 1947 . .

Ambassador Stuart's Comments

“Some Fundamental Considerations on American Aid

to China"

Washington Discussions with Chinese Representa-
tives

Premier Chang Chun's Statement of January 28,

1948

Presentation of the China Aid Program to Congress . .

III. The China Aid Act of 1948

IV. Implementation of the China Economic Aid Program . .

Initiation of the Program .

Undertakings by the Chinese Government

Specific Economic Measures Recommended to China .

Progress of the Economic Aid Program

Continuation of Economic Aid Beyond April 3, 1949 .
The Appraisal of Acting President Li

Page

354

354

354

357

358

360

360

361
364
367
369

371

371

371

372

373

375

376

377

378

379
387
390

390

391
394
398
404
409

LIST OF ANNEXES

CHAPTER I

A Century of American Policy , 1844-1 948

Page

1. Treaty Between the United States and China, July 3, 1844, Article II . 413

2. Treaty Between the United States and China, June 18, 1858, Article

XXX 413

3. Treaty Between the United States and China, July 28, 1868, Article

VI 414

4. The Open Door Notes: September 6, 1899; March 20, 1900 414

5. Secretary Hay to Certain American Diplomatic Representatives, July

3, 1900 416

6. Treaty Between the United States and China, October 8, 1903 .... 417

7. Secretary Hay to Certain American Diplomatic Representatives, Feb-

ruary 10, 1904 426

8. Secretary Hay to Certain American Diplomatic Representatives, Jan-

uary 13, 1905 426

9. Root-Takahira Agreement, November 30, 1908 427

10. Memorandum by Secretary Knox on Neutralization of the Manchurian

Railways, November 6, 1909 428

11. Secretary Bryan to the Japanese Ambassador, March 13, 1915 .... 430

12. Secretary Bryan to the Ambassador in Japan, May 11, 1915 436

13. Lansing-Ishii Agreement, November 2, 1917 437

14. Treaty Between the United States and Other Powers, February 6, 1922. 438

15. Statement by Secretary Kellogg, January 27, 1927 442

16. Treaty Between the United States and China, July 25, 1928 445

17. Secretary Stimson to the Ambassador in Japan, January 7, 1932 . . . 446

18. Secretary Stimson to the Chairman of the Senate Committee on Foreign

Relations, February 23, 1932 447

19. Statement by Secretary Hull, December 5, 1935 450

20. Press Release Issued by the Department of State, October 6, 1937 . . . 451

21. The Ambassador in Japan to the Japanese Piime Minister and Foreign

Minister, October 6, 1938 452

22. The Japanese Foreign Minister to the Ambassador in Japan, November

18, 1938 456

23. The Ambassador in Japan to the Japanese Foreign Minister, December

30, 1938 459

24. Statement by Secretary Hull, March 30, 1940 463

25. Document Handed by Secretary Hull to the Japanese Ambassador,

November 26, 1941 464

26. Master Lend-Lease Agreement Between the United States and China,

June 2, 1942 466

27. (a) Secretary of War Stimson to the Chinese Minister for Foreign

Affairs, January 29, 1942 468

(b) The Chinese Minister for Foreign Affairs to Secretary of War

Stimson, January 30, 1942 469

XXVIII

LIST OF ANNEXES

XXIX

Page

28. Five Hundred Million Dollar Financial Aid of 1942 and Other War-

time Financial Relationships (28(a)-28(ii)) 470

29. (a) President Roosevelt to Generalissimo Chiang Kai-shek, February

7, 1942 510

(b) Joint Statement by Secretary of the Treasury Morgenthau and
Dr. T. V. Soong, Chinese Minister for Foreign Affairs, March 21,

1942 510

30. Statement by Acting Secretary Welles, July 19, 1940 512

31. Secretary Hull to the Appointed Chinese Minister for Foreign Affairs,

May 31, 1941 513

32. Treaty Between the United States and China, January 11, 1943 . . . 514

33. Statement on Conference of President Roosevelt, Generalissimo Chiang

Kai-shek, and Prime Minister Churchill, Cairo, December 1, 1943 . 519

CHAPTER II

A Review of Kuomintang-Chinese Communist Relations t 1921-1944

34. Manifesto on the Seizure of Generalissimo Chiang Kai-shek, December

12, 1936 521

35. The Central Committee of the Chinese Communist Party to the Third

Plenary Session of the Fifth Central Executive Committee of the
Kuomintang, February 10, 1937 522

36. Manifesto on Unity by the Central Committee of the Chinese Com-

munist Party, September 22, 1937 523

37. Statement by Generalissimo Chiang Kai-shek, September 23, 1937 . . 524

38. Message of Generalissimo Chiang Kai-shek to the People’s Political

Council, March 6, 1941 526

39. Statement by Generalissimo Chiang Kai-shek, September 13, 1943 . . 530

40. Report by the Representative of the National Government to the

People’s Political Council, September 15, 1944 531

41. Report by the Representative of the Central Committee of the Chinese

Communist Party to the People’s Political Council, September 15,

1944 544

42. Statement by the Chinese Minister of Information, September 20,

1944 549

43. Summary Notes of Conversations Between Vice President Henry A.

Wallace and President Chiang Kai-shek, June, 1944 549

44. President Roosevelt to President Chiang Kai-shek, July 14, 1944 . . 560

chapter m

The Ambassadorship of Major General Patrick J . Hurley , 1944-1945

45. The Ambassador in China to Secretary Hull, August 31, 1944 .... 561

46. Secretary Hull to the Ambassador in China, September 9, 1944 . . . 563

47. Memoranda by Foreign Service Officers in China, 1943-1945 .... 564

48. (a) The Vice Chairman of the Central Committee of the Chinese

Communist Party to the Ambassador in China, February 18,

1945 576

(b) The Ambassador in China to the Vice Chairman of the Central
Committee of the Chinese Communist Party, February 20,

1945 577

XXX

LIST OF ANNEXES

Page

49. Summary of Conversations between Representatives of the National

Government and of the Chinese Communist Party, October 11,

1945 577

50. The Ambassador to China to President Truman, November 26, 1945 . 581

CHAPTER IV

The Yalta Agreement and the Sino-Soviet Treaty of 1945

51. Treaty of Friendship and Alliance Between China and the U.S.S.R.,

August 14, 1945 585

52. Exchange of Notes Relating to the Treaty of Friendship and Alliance,

August 14, 1945 587

53. Exchange of Notes on Outer Mongolia, August 14, 1945 588

54. Agreement Between China and the U.S.S.R. Concerning Dairen . . . 589

55. Protocol to the Agreement on Dairen 589

56. Agreement Between China and the U.S.S.R. on Port Arthur, August 14,

1945 590

57. Appendix to Agreement on Port Arthur, August 14, 1945 591

58. Agreement Between China and the U.S.S.R. on Relations Between the

Chinese Administration and Commander-in-Chief of Soviet Forces
after Entry into the “Three Eastern Provinces” 592

59. Agreement Between China and the U.S.S.R. on the Chinese Changchun

Railway, August 14, 1945 593

60. Red Army “War Booty” Removals from Manchuria (60(a)-60(c)) . . 596

chapter v

The Mission of General George C. Marshall , 19 45-19 47

61. President Truman to the Special Representative of the President,

December 15, 1945 605

62. Statement by President Truman on United States Policy toward China,

December 15, 1945 607

63. Press Release on Order for Cessation of Hostilities, January 10, 1946 . 609

64. Resolution on Government Organization Adopted by the Political Con-

sultative Conference, January, 1946 610

65. Resolution on Program for Peaceful National Reconstruction Adopted

by the Political Consultative Conference, January, 1946 612

66. Resolution on Military Problems Adopted by the Political Consultative

Conference, January 1946 617

67. Agreement on the National Assembly by Sub-Committee of the Polit-

ical Consultative Conference 619

68. Resolution on the Draft 1936 Constitution Adopted by the Political

Consultative Conference, January, 1946 619

69. Press Release by Military Sub-Committee Concerning Agreement on

Military Reorganization, February 25, 1946 622

70. Memorandum by the Military Sub-Committee, March 16, 1946 . . . 626

71. (a) Agreement on Establishment of the Executive Headquarters,

January 10, 1946 627

(b) The Committee of Three to Generalissimo Chiang Kai-shek,

January 10, 1946 629

(c) Memorandum on Operations of the Executive Headquarters . . . 629

(d) Memorandum Concerning Repatriation of Japanese 632

LIST OF ANNEXES

XXXI

72. Ratification by Central Executive Committee of the Kuomintang of

Resolutions Adopted by Political Consultative Conference, March
16, 1946

73. Memorandum by the Chairman of the Committee of Three, January

24, 1946

74. The Committee of Three to the Executive Headquarters, March 27,

1946

75. The Committee of Three to the Three Commissioners of Executive

Headquarters, May 14, 1946

76. (a) Statement by Generalissimo Chiang Kai-shek, June 6, 1946 . . .
(b) Statement by Vice Chairman of the Central Committee of the

Chinese Communist Party, June 6, 1946

77. Directive by the Committee of Three for Reopening Comimmication

Lines in North and Central China, June, 1946

78. Agreement by the Committee of Three, June 24, 1946

79. The Committee of Three to the Three Commissioners of Executive

Headquarters [June 26?] 1946

80. Preliminary Agreement Proposed by the Chairman of the Committee

of Three, June, 1946

81. Manchuria Annex to Preliminary Agreement Proposed by Chairman

of the Committee of Three, June, 1946

82. Radio Message by Generalissimo Chiang Kai-shek, July 1, 1946 . .

83. Joint Statement by Mao Tse-tung and General Chu Teh, July 1,

1946

84. Joint Statement by the Special Representative of the President and

the Ambassador in China, August 10, 1946

85. Statement by President Chiang Kai-shek, August 13, 1946

86. President Truman to President Chiang Kai-shek, August 10, 1946 . . .

87. The Chinese Ambassador to President Truman, August 28, 1946. . .

88. President Truman to President Chiang Kai-shek, August 31, 1946 . . .

89. The Head of the Chinese Communist Party Delegation to the Special

Representative of the President, September 15, 1946

90. The Head of the Chinese Communist Party Delegation to the Special

Representative of the President, September 16, 1946

91. The Special Representative of the President to the Head of the

Chinese Communist Party Delegation, September 19, 1946 ....

92. The Head of the Chinese Communist Party Delegation to the Special

Representative of the President, September 21, 1946

93. The Special Representative of the President and the Ambassador in

China to the Head of the Chinese Communist Party Delegation,
September 26, 1946

94. The Head of the Chinese Communist Party Delegation to the Special

Representative of the President and the Ambassador in China,
September 27, 1946

95. Draft of Statement for Generalissimo Chiang Kai-shek, September

1946

96. The Head of the Chinese Communist Party Delegation to the Special

Representative of the President, September 30, 1946

97. The Special Representative of the President to President Chiang Kai-shek,

October 1, 1946.

Page

634

639

640

640

641

642

642

644

644

645

646

647

648

648

649
652

653

654

654

656

657
657

659

659

660
661

662

XXXII

LIST OF ANNEXES

Page

98. President Chiang Kai-shek to the Special Representative of the Presi-

dent, October 2, 1946 663

99. The Special Representative of the President to the Ambassador in

China, October 6, 1946 664

100. Statement by the Chinese Communist Party, October 8, 1946 . . . 665

101. Joint Statement by the Special Representative of the President and

the Ambassador in China, October 8, 1946 665

102. The Head of the Chinese Communist Party Delegation to the Special

Representative of the President, October 9, 1946 667

103. Address Delivered by President Chiang Kai-shek at Nanking, October

10, 1946 669

104. Draft of Statement for Generalissimo Chiang Kai-shek, October 14,

1946 673

105. Statement by Generalissimo Chiang Kai-shek, October 16, 1946 . . 674

106. Proposals by the Third Party Group, October, 1946 675

107. Draft of Statement for Generalissimo Chiang Kai-shek, November 7,

1946 676

108. Statement by Generalissimo Chiang Kai-shek, November 8, 1946 . . 677

109. The Head of the Chinese Communist Party Delegation to the Special

Representative of the President, November 8, 1946 678

110. Address Delivered by President Chiang Kai-shek at Nanking, Novem-

ber 15, 1946 679

111. Statement by the Head of the Chinese Communist Party Delegation,

November 16, 1946 683

112. The Representative of the Chinese Communist Party to the Special

Representative of the President, December 4, 1946 685

113. Personal Statement by the Special Representative of the President,

January 7, 1947 686

114. Statement by President Truman on United States Policy Toward

China, December 18, 1946 689

115. Press Release Issued by the Department of State, January 29, 1947 . 695

CHAPTER VI

The Ambassadorship of John Leighton Stuart , 19^7-19^9

116. (a) Statement Issued by the Ministry of Information, Chinese

National Government, January 20, 1947 697

(b) Statement by the Chief of the Department of Information, Cen-

tral Committee, Chinese Communist Party, January 29, 1947 . 699

(c) Statement Issued by the Ministry of Information, Chinese

National Government, January 29, 1947 703

(d) Statement by Generalissimo Chiang Kai-shek, February 16, 1947 . 704

117. Radio Speech by the Vice Chairman of the Central Committee of the

Chinese Communist Party, January 10, 1947 706

118. Memorandum by the Chief of the Department of Information, Cen-

tral Committee, Chinese Communist Party, Concerning Postwar
International Situation, January, 1947 710

119. Statement of the Central Committee of the Chinese Communist

Party, February 1, 1947 719

120. Article by the Chairman of the Central Committee of the Chinese

Communist Party Commemorating 28th Anniversary of the Party,

June 30, 1949 720

LIST OF ANNEXES

XXXIII

Page

121. The Ambassador in China to Secretary Marshall, May 20, 1947 . . 729

122. The Ambassador in China to Secretary Marshall, June 4, 1947 . . 731

123. The Ambassador in China to Secretary Marshall, May 30, 1947 . . 732

124. The Ambassador in China to Secretary Marshall, July 1, 1947 . . . 732

125. The Ambassador in China to Secretary Marshall, April 5, 1947 . . 735

126. Summary of Manifesto Issued by Central Executive Committee of

the Kuomintang, March 24, 1947 • 737

127. (a) Statement by President ‘ Chiang Kai-shek announcing Reorgan-

ization of the State Council, April 18, 1947 739

(b) Text of the Political Program of the National Government of

China, April 17, 1947 740

(c) Statement by the Minister of Information, Chinese National

Government, April 23, 1947 741

(d) Inaugural Radio Speech by the President of the Executive Yuan,

April 23, 1947 742

128. The Ambassador in China to Secretary Marshall, April 19, 1947 . . 744

129. The Ambassador in China to Secretary Marshall, July 5, 1947 . . . 746

130. Central News Agency Bulletin of July 5, 1947, Concerning Declara-

tion by President of the Executive Yuan on Restoration of National
Unity 748

131. Radio Broadcast by President Chiang Kai-shek, July 7, 1947 ... 749

132. The Ambassador in China to Secretary Marshall, July 21, 1947 . . 756

133. Summary of Remarks Made by Lieutenant General Albert C. Wede-

meyer Before a Joint Meeting of the State Council and All Ministers
of the National Government, August 22, 1947 758

134. Statement by Lieutenant General Albert C. Wedemeyer on Conclusion

of Mission in China, August 24, 1947 763

135. Report to President Truman by Lieutenant General Albert C. Wede-

meyer, September 19, 1947 764

136. The Consul General at Shanghai to Secretary Marshall, September 2,

1947 815

137. The Ambassador in China to Secretary Marshall, August 30, 1947 . 816

138. Memorandum from the Chinese Government to Lieutenant General

Albert C. Wedemeyer, September 6, 1947 817

139. The Ambassador in China to Secretary Marshall, August 11, 1947 . 822

140. The Ambassador in China to Secretary Marshall, August 19, 1947 . 823

141. The Ambassador in China to Secretary Marshall, August 26, 1947 . 824

142. The Ambassador in China to Secretary Marshall, September 17, 1947 . 826

143. The Ambassador in China to Secretary Marshall, September 20,

1947 828

144. The Ambassador in China to Secretary Marshall, September 20,

1947 830

145. The Ambassador in China to Secretary Marshall, October 29, 1947 . 832

146. Article Published in Central News Agency Bulletin, October 28, 1947 . 834

147. Announcement by the China Democratic League, November 6, 1947 . 834

148. The Ambassador in China to Secretary Marshall, November 5, 1947 . 836

149. The Ambassador in China to Secretary Marshall, January 9, 1948 . . 840

150. (a) The Ambassador in China to Secretary Marshall, February 5,

1948 841

(b) The Ambassador in China to Secretary Marshall, February 6,

1948 843

844538 — 49 3

XXXIV

LIST OF ANNEXES

Page

151. (a) The Ambassador in China to Secretary Marshall, March 17,

1948 844

(b) The Ambassador in China to Secretary Marshall, March 31,

1948 845

152. (a) The Ambassador in China to Secretary Marshall, April 2, 1948 . 846

(b) Speech by Generalissimo Chiang Kai-shek Before the Central

Executive Committee of the Kuomintang, April 4, 1948 . . . 847

(c) The Ambassador in China to Secretary Marshall, April 5, 1948 . 849

(d) The Ambassador in China to Secretary Marshall, April 6, 1948 . 849

(e) The Ambassador in China to Secretary Marshall, April 19,

1948 850

(f) The Ambassador in China to Secretary Marshall, April 23,

1948 851

(g) The Ambassador in China to Secretary Marshall, April 23,

1948 851

(h) The Ambassador in China to Secretary Marshall, April 25,

1948 852

(i) The Ambassador in China to Secretary Marshall, April 26,

1948 853

(j) The Ambassador in China to Secretary Marshall, April 27,

1948 854

(k) The Consul General at Shanghai to Secretary Marshall, April 27,

1948 855

(l) The Ambassador in China to Secretary Marshall, April 29,

1948 . 856

(m) The Ambassador in China to Secretary Marshall, May 3, 1948 . 857

(n) Editorial from the New China News Agency, May 24, 30,

1948 859

153. (a) The Ambassador in China to Secretary Marshall [May?]

1948 864

(b) The Ambassador in China to Secretary Marshall, May 19,

1948 865

(c) The Ambassador in China to Secretary Marshall, May 22,

1948 866

(d) The Ambassador in China to Secretary Marshall, May 24,

1948 867

(e) The Ambassador in China to Secretary Marshall, June 23,

1948 868

154. The Ambassador in China to Secretary Marshall, June 5, 1948 . . . 869

155. The Ambassador in China to Secretary Marshall, August 20, 1948 . 871

156. (a) The Consul at Shanghai to Secretary Marshall, June 24,

1948 872

(b) The Ambassador in China to Secretary Marshall, July 6,

1948 872

(c) The Consul General at Tientsin to Secretary Marshall, July 14,

1948 874

(d) The Ambassador in China to Secretary Marshall, July 17, 1948 . 875

LIST OF ANNEXES

XXXV

Page

157. (a) The Ambassador in China to Secretary Marshall, August 23,

1948 877

(b) Secretary Marshall to the Chinese Minister for Foreign Affairs,

August 28, 1948 878

(c) The Ambassador in China to Secretary Marshall, October 15,

1948 879

158. The Consul General at Shanghai to Secretary Marshall, November 2,

1948 880

159. Editorial from the “Chung Yang Jih Pao,” November 4, 1948 . . . 880

160. The Ambassador in China to Secretary Marshall, November 1, 1948 . 882

161. The Ambassador in China to Secretary Marshall, August 10, 1948 . . 885

162. (a) Secretary Marshall to Under Secretary Lovett, Paris, November

6, 1948 887

(b) Secretary Marshall to Under Secretary Lovett, Paris, November

8, 1948 887

163. President Chiang Kai-shek to President Truman, November 9, 1948 . 888

164. President Truman to President Chiang Kai-shek, November 12, 1948. 889

165. (a) The Ambassador in China to Secretary Marshall, November 5,

1948 890

(b) The Ambassador in China to Secretary Marshall, November 6,

1948 894

(c) The Consul General at Shanghai to Secretary Marshall, Novem-

ber 29, 1948 894

(d) The Ambassador in China to Secretary Marshall, December 16,

1948 895

(e) The Ambassador in China to Secretary Marshall, December 19,

1948 896

(f) The Ambassador in China to Secretary Marshall, December 21,

1948 897

(g) The Ambassador in China to Secretary Marshall, December 29,

1948 899

(h) The Ambassador in China to Secretary Marshall, December 30,

1948 900

166. A Series of Chronicle Summaries by the American Embassy in

Nanking to the Department of State during 1948 901

167. New Year Message, 1949, of President Chiang Kai-shek 920

168. The Chinese Minister for Foreign Affairs to the Ambassador in China,

January 8, 1949 922

169. Memorandum on the Situation in Taiwan, April 18, 1947 923

CHAPTER VII

The Military Picture , 1945-1949

170. Oral Statement by President Truman to Dr. T. V. Soong Concerning

Assistance to China, September 14, 1945 939

171. Study of American Military Mat4riel and Services Provided to the

Chinese National Government since V-J Day (September 2, 1945) . 940

172. Categories of American Military Aid Extended to China Since V-J

Day (September 2, 1945) 969

XXXVI

LIST OF ANNEXES

Page

173. Transfer and Sale of Ammunition and Materiel to the Chinese Na-

tional Government During 1947 and 1948 974

174. Statement Submitted by Brigadier General T. S. Timberman to the

Committee on Foreign Affairs of the House of Representatives, June
21, 1949 975

CHAPTER VIII

The Program of American Economic Aid , 1947-1949

175. (a) Message from President Truman on Aid to China, February 18,

1948 981

(b) Statement by Secretary Marshall Regarding the China Aid Pro-
gram, February 20, 1948 983

176. Statement Issued by the Ambassador in China, February 20, 1948 . 985

177. Statement by the Department of State, the Department of the Treas-

ury, and the Federal Reserve Board on Possible Use of Silver for
Monetary Stabilization in China in Connection With China Aid Pro-
gram [February 1948] 987

178. (a) Secretary Marshall to the Ambassador in China, January 12,

1948 989

(b) Secretary Marshall to the Ambassador in China, May 7, 1948 . . 990

179. Text of China Aid Act of 1948, April 3, 1948 991

180. The Ambassador in China to Secretary Marshall, May 10, 1948 . . . 993

181. Text of Economic Aid Agreement Between the United States and

China, July 3, 1948 994

182. Informal Memorandum Regarding Basic Reforms, Handed by Am-

bassador Stuart to President Chiang Kai-shek, May 22, 1948 . . . 1001

183. Exchange of Notes Between the United States and China Providing

for Establishment of a Sino-American Joint Commission on Rural
Reconstruction, August 5, 1948 1004

184. Economic Aid to China Under the China Aid Act of 1948, February

1949 1006

185. Summary of United States Government Economic, Financial, and

Military Aid to China Since 1937, Issued March 21, 1949 .... 1042

186. Secretary Acheson to Senator Tom Connally, Chairman of the Senate

Committee on Foreign Relations, March 15, 1949 1053

Chronology of Principal Events Affecting
Sino-American Relations

1844
July 3

Treaty of Wanghia, first Sino-U.S. treaty (Cushing Treaty)

1858
June 18

Treaty of Tientsin (Reed Treaty)

1868
July 28

Treaty of Washington (Burlingame Treaty)

1899

Sept.- Mar.
1900

Secretary Hay’s Open Door notes

1900
July 3

U.S. policy on preservation of Chinese territorial and admin-
istrative entity announced

1903
Oct. 8

Sino-U.S. Commercial Treaty signed at Shanghai

1905
Sept. 5

Treaty of Portsmouth, ending Russo-Japanese War

1908
Nov. 30

Root-Takahira Agreement

1909

Nov.-Dee.

Knox “neutralization” of Manchurian railways proposal

1911
Oct. 10

Start of Chinese Revolution

1912
Feb. 12

Abdication of Manchu dynasty and establishment of Chinese
Republic

1915
Mar. 13

Secretary Bryan’s statement of opposition to Japanese
Twenty-One Demands on China

May 11

Secretary Bryan’s statement of nonrecognition of Sino-
Japanese agreements impairing American treaty rights in
China

1917
Aug. 14
Nov. 2

Chinese declaration of war against Germany
Lansing-Ishii Agreement

XXXVII

XXXVIII

CHRONOLOGY OF PRINCIPAL EVENTS

1921

May

Foundation meeting of Chinese Communist Party held at
Shanghai

1922
Feb. 6

Nine-Power Treaty signed at Washington Conference

1927
Jan. 27

Secretary Kellogg’s statement expressing sympathy with
Chinese nationalism and U.S. policy of noninterference in
Chinese internal affairs

Apr.-July

Development of Kuomintang-Communist breach

1928
June 8
July 6

Peking taken by Nationalist forces led by Yen Hsi-shan
Unification of China under Kuomintang announced by Chiang
Kai-shek

July 25

U.S. recognition of the National Government of the Republic
of China

1931
Sept. 18

Beginning of Japanese conquest of Manchuria

1932
Jan. 7

Secretary Stimson’s announcement of policy of nonrecogni-
tion of territorial changes brought about by force

Feb. 23

Secretary Stimson’s letter to Senator Borah outlining U.S.
policy in the Sino-Japanese dispute

1934
Apr. 29
July 7

U.S., in note to Japan, reasserted its treaty rights in China
U.S. protest to Japan regarding the creation of a petroleum
monopoly in Manchuria

1936
May 5
Dec. 12

Draft Chinese Constitution promulgated

Generalissimo Chiang Kai-shek “arrested” by Chang Hsueh-

Dec. 25

liang at Sian, Shensi

Generalissimo Chiang released from Sian “captivity”

1937
July 7
Sept. 22

Start of Japan’s undeclared war on China
Manifesto of Central Committee of Communist Party re-
garding formation of “united front” with Kuomintang

Sept. 23

Statement by Generalissimo Chiang Kai-shek welcoming
manifesto

Oct. 5
Nov. 3-24

President Roosevelt’s “quarantine” speech in Chicago
Brussels Conference convened in virtue of article VII of
Nine-Power Treaty of 1922

1938
Oct. 6

U.S. protest regarding Japanese nonobservance of the Open
Door in China

1939
July 26

U.S. gave notice of termination of Japan-U.S. Commercial
Treaty of Feb. 21, 1911

CHRONOLOGY OF PRINCIPAL EVENTS

xxxrx

1940
Mar. 30

1941
May 6

July 26
Dec. 7
Dec. 8

U.S. denounced setting up of Wang Ching-wei regime in
Nanking

China declared eligible by President Roosevelt for lend-lease
assistance

United States froze Japanese assets in United States
Japanese attack upon Pearl Harbor
U.S. declaration of war against Japan

1942

Jan. 29-30

Feb. 2

Feb. 7
Mar. 6

Soong-Stimson exchange of notes regarding appointment of
General Stilwell as Chief of Staff of Generalissimo Chiang’s
Joint Staff, and United States Army Representative in
China

Letter orders issued by General Marshall ordering General
Stilwell to Chungking to serve under Supreme Command
of Generalissimo Chiang
U.S. loan to China of $500,000,000 authorized
General Stilwell reported to Generalissimo Chiang

1943
Jan. 11

Oct. 30

Nov. 22-26
Nov. 28-
Dec. 1
Dec. 1
Dec. 17

1944
June
Aug. 18

Aug. 31
Oct. 24

1945
Jan. 8

Feb. 4^11
Feb. 11
Apr. 15

May 8
July 17-
Aug. 1
July 26

Aug. 9
Aug. 14

Sino-U.S. treaty providing for relinquishment of American
extraterritoriality signed at Washington
Declaration of Four Nations on General Security signed by
U.K., U.S., U.S.S.R. and China at Moscow
Cairo Conference of Roosevelt, Churchill and Chiang Kai-shek
Tehran Conference of Roosevelt, Churchill and Stalin

Cairo Declaration issued by U.S., U.K. and China
Repeal by U.S. Congress of discriminatory legislation re-
garding Chinese immigration and naturalization

Vice President Henry A. Wallace’s mission to China
General Patrick J. Hurley appointed Personal Representative
of President Roosevelt to China
General Hurley’s conversation with Molotov in Moscow
Recall of General Stilwell from China announced

General Hurley presented credentials as American Ambassador
to China to Generalissimo Chiang Kai-shek
Yalta Conference of Roosevelt, Churchill and Stalin
Yalta Agreement signed by Roosevelt, Churchill and Stalin
Ambassador Hurley conferred with Stalin and Molotov at
Moscow regarding settlement of Kuomintang-Communist
question
V-E Day

Berlin Conference of U.S., U.K. and U.S.S.R.

Potsdam Declaration calling upon Japan to surrender un-
conditionally issued by U.S., U.K., and China
Soviet Union entered war against Japan
Surrender of Japan

XL

CHRONOLOGY OF PRINCIPAL EVENTS

1945
Aug. 14

Oct. 11

Nov. 27
Nov. 27

Dec. 15

Dec. 16-27

1946
Jan. 7
Jan. 10

Jan. 10-31
Jan. 13
Jan. 14
Jan. 31
Feb. 25

Mar. 1-17
Mar. 11
Apr. 18
Apr. 18
May 5
May 19
May 23
June 7
June 27
June 30
July 11

July 29
Aug. 10

Aug. 30
Oct. 11
Nov. 2

Nov. 15-
Dec. 25
Dec. 18

1947
Jan. 6
Jan. 7

Jan. 29

Sino-Soviet Treaty of Friendship and Alliance and related
agreements signed at Moscow

Summary of National Government-Communist conversations
issued

Resignation of Ambassador Hurley announced
Appointment of Gen. George C. Marshall as President
Truman’s Special Representative to China announced
Statement of United States policy on China issued by Presi-
dent Truman

Moscow Conference of Foreign Ministers of U.S., U.K., and
U.S.S.R.

First meeting of the Committee of Three
Committee of Three agreement regarding cessation of hos-
tilities

Meeting of the Political Consultative Conference
Effective date of the cessation-of-hostilities agreement
Executive Headquarters at Peiping began official functions
Resolutions adopted by Political Consultative Conference
Agreement reached on basic plan for military reorganization
and integration of Communist forces into the National
Army

Meeting of the Kuomintang Central Executive Committee
General Marshall left China for U.S. to report to the President
General Marshall returned to China
Occupation of Changchun by Chinese Communist forces
Transfer of National Government from Chungking to Nanking
Occupation of Ssupingchieh by National Government troops
Occupation of Changchun by National Government troops
Beginning of truce period in Manchuria

Joint China-U.S. Agricultural Mission commenced operations
Expiration of the truce; negotiations at an apparent stalemate
Senate confirmation of J. Leighton Stuart as American
Ambassador to China

Communist ambush of U.S. Marine convoy near Peiping
Joint statement on situation in China issued by General
Marshall and Ambassador Stuart
Conclusion of Sino-American surplus-property sale agreement
Occupation of Kalgan by National Government troops
Sino-U. S. Treaty of Friendship, Commerce and Navigation
signed at Nanking

Meeting of the National Assembly to adopt a Constitution

Statement by President Truman of American policy toward
China

General Marshall's recall announced

General Marshall’s nomination as Secretary of State an-
nounced

U. S. announced termination of its connection with the Com-
mittee of Three and Executive Headquarters

CHRONOLOGY OF PRINCIPAL EVENTS

XU

1947
Feb. 11

Feb. 28
Mar. 1

Mar. 19
Apr. 17

June 30

July 9

Aug. 24
Sept. 9

Sept. 19
Oct. 28

1948
Mar. 12
Mar. 29
Apr. 3
July 3

Aug. 5

Aug. 19
Sept. 23-24
Oct. 15
Oct. 20
Nov. 1
Dec. 1
Dec. 31

1949
Jan. 1

Jan. 8
Jan. 12
Jan. 15
Jan. 21

Jan. 31
Feb. 5
Mar. 12
Mar. 24
Apr. 14
Apr. 20
May 16-17
May 25
June 2
June 3

Chinese Government notified Communist delegation in Nan-
king that its presence was no longer desired
Uprising in Taiwan

Reorganization of the Legislative Yuan and the Control Yuan
announced

Occupation of Yenan by National Government troops
Reorganization of the Executive Yuan and the State Council
announced

Extraordinary meeting of the Standing Committee of the
Kuomintang Central Executive Committee
President Truman instructed General Wedemeyer to proceed
to China on a fact-finding mission
General Wedemeyer’ s statement on his departure from China
Fourth Plenary Session of the Kuomintang Central Executive
Committee opened

General Wedemeyer submitted his report to the President
The Democratic League outlawed

Occupation of Ssupingchieh by Chinese Communist forces
Meeting of the National Assembly
China Aid Act of 1948 approved by President Truman
Agreement signed covering terms of American economic aid
to China

Exchange of notes providing for establishment of Sino-Ameri-
can Joint Commission on Rural Reconstruction in China
Economic reform decrees issued by National Government
Occupation of Tsinan by Chinese Communist forces
Occupation of Chinchow by Chinese Communist forces
Occupation of Changchun by Chinese Communist forces
Occupation of Mukden by Chinese Communist forces
Occupation of Hsuchow by Chinese Communist forces
Formation of Sun Fo’s cabinet

New Year’s messages by Generalissimo Chiang Kai-shek and
Prime Minister Sun

Chinese request for Big Four mediation
U.S. declination to act as an intermediary
Occupation of Tientsin by Chinese Communist forces
Chiang Kai-shek announced his decision to retire; Li Tsung-
jen became Acting President
Occupation of Peiping by Chinese Communist forces
Most of the Chinese Government’s offices moved to Canton
Ho Ying-chin became Prime Minister in Canton
Occupation of Taiyuan by Chinese Communist forces
Extension of China Aid Act of 1948
Crossing of Yangtze River by Communist forces
Occupation of Hankow by Chinese Communist forces
Occupation of Shanghai by Chinese Communist forces
Occupation of Tsingtao by Chinese Communist forces
Yen Hsi-shan became Prime Minister in Canton

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CHAPTER I

A Century of American Policy, 1844^1943

I. INTRODUCTION

For more than half a century the policy of the United States toward
China has been based on the twin principles of (1) equality of com-
mercial opportunity, and (2) the maintenance of the territorial and
administrative integrity and political independence of China. Al-
though the United States has at times recognized the special relations
between China and neighboring countries, it has also recognized and
asserted that the domination of China by any one Power or any group
of Powers is contrary to the interests both of China and of the United
States. The United States has advocated a policy of noninterference
in the internal affairs of China. The United States has taken the posi-
tion that the Chinese people should be given time to develop those
political institutions which would best meet their needs in the modern
world. The United States has also sought to prevent third Powers
from utilizing disturbances within China as an opportunity for indi-
vidual or collective aggrandizement. The United States has long
been interested in the creation of conditions which would permit the
development of a stable Chinese political organism, and in its relations
with China has supported the principle of peaceful settlement of dis-
putes in accordance with the generally recognized precepts of inter-
national law.

II. DEVELOPMENT OF BASIC AMERICAN POLICY

EQUALITY OF COMMERCIAL OPPORTUNITY

During the nineteenth century United States policy .toward China
was expressed by treaties and ordinary diplomatic procedures designed
to secure equality of trading rights in China. The fundamental prin-
ciple underlying American relations with China — equality of com-
mercial opportunity — was incorporated in the first treaty between the
two Powers, the Treaty of Wanghia signed on July 3, 1844, in the

1

2

U. S. RELATIONS WITH CHINA

form of a most-favored-nation clause. 1 This provision guaranteed
that whatever treaty rights other Powers gained with respect to trade,
residence, religious activity, tariffs or other commercial regulations
would automatically accrue to the United States. The most-favored-
nation clause was retained in the subsequent commercial treaties nego-
tiated with China in the nineteenth century, namely the Treaty of
Tientsin of 1858 2 and the Burlingame Treaty of 1868. 3 The principle
of equality of commercial opportunity worked well until the late
1890’s, when new imperialistic pressures seemed to threaten a division
of China into spheres of interest among the other Great Powers.

ENUNCIATION OF THE OPEN DOOR POLICY

Under the circumstances the United States resorted to a new ap-
proach, using another formula to secure its objectives. The Open
Door notes of Secretary of State John Hay to the Powers during the
period from September to November 1899 gave concrete expression
to the principle of equality of opportunity. 4 Hay asked the Powers
involved in the struggle over China to give guarantees that in their
respective “spheres of influence or interest” they would not interfere
with the equality of rights of nationals of other countries in matters
of tariffs, railroad charges, and harbor dues. The replies to these
notes were somewhat equivocal or conditional, the Russian reply being
the most evasive of all. Nevertheless the diplomatic language of the
replies made it possible for Hay to announce to the world that the
policy of the Open Door had been accepted, and that it was the gov-
erning policy in China.

The anti-foreign disturbances in China in 1900, usually referred
to as the Boxer Rebellion, afforded the United States (which had
participated with the other Powers in a joint expeditionary force sent
to rescue the beleaguered legations in Peking) an opportunity to make
a statement of policy which went a step beyond the Open Door notes
of the preceding year. In a circular note to the participating Powers,
dated July 3, 1900, Hay declared that the “policy of the Government
of the United States is to seek a solution” of the difficulties in China
which would “preserve Chinese territorial and administrative entity”
and “safeguard for the world the principle of equal and impartial
trade with all* parts of the Chinese Empire.” 5 Thus the principle of
the maintenance of Chinese territorial and administrative entity be-

1 See annex 1.

* See annex 2.

* See annex 3.

4 See annex 4.

8 See annex 5.

A CENTURY OF AMERICAN POLICY

3

came the policy of the United States. This policy was helpful in
achieving a solution of the difficulties between China and the Powers
arising from the destruction of property and loss of foreign lives in
the course of the Boxer Rebellion. The terms of settlement of the
incident were contained in the Protocol of Peking, signed September
7 , 1901, which, among other things, required China to pay, over a
period of years, an indemnity amounting to 333 million dollars. Of
this the United States claimed only 25 million dollars, which proved
to be more than adequate to indemnify American nationals. Under
arrangements provided through Congressional action in 1908 and 1924
the United States remitted all Boxer indemnity payments not allocated
to claimants. Altogether the United States returned approximately
18 million dollars to the Chinese Government, which placed the money
in a trust fund for the education of Chinese youths in China and in
the United States. On J anuary 11, 1943, the United States yielded all
further claims to indemnity payments.

EARLY EFFORTS TO MAINTAIN THE OPEN DOOR

Since the turn of the century the United States has sought to main-
tain, by diplomacy, the twin principles of equal commercial oppor-
tunity and Chinese territorial and administrative integrity on
numerous occasions. At the same time the United States extended the
Open Door doctrine by interpreting it to prohibit exclusive mining
or railway privileges and commercial monopolies. These extensions
were initially aimed largely at Russia, which was pushing down
through Manchuria and threatening Chinese control over that vast
territory. After the Russo-Japanese War, 1904-1905, the principles
were turned more sharply against Japan, which had taken Russia’s
place in the southern half of Manchuria as a menace to Chinese
territorial and administrative integrity.

When Russia endeavored through pressure upon China to obtain
a privileged position in Manchuria, the United States circularized the
Powers on February 1, 1902, protesting that such action was contrary
to the Open Door policy. The American memorandum stated :

“An agreement by which China cedes to any corporation or com-
pany the exclusive right and privilege of opening mines, establishing
railroads, or in any other way industrially developing Manchuria,
can but be viewed with the gravest concern by the Government of the
United States. It constitutes a monopoly, which is a distinct breach
of the stipulations of treaties concluded between China and foreign
powers, and thereby seriously affects the rights of American citizens ;
it restricts their rightful trade and exposes it to being discriminated
against, interfered with, or otherwise jeopardized, and strongly tends

4

U. S. RELATIONS WITH CHINA

toward permanently impairing the sovereign rights of China in this
part of the Empire, and seriously interferes with her ability to meet
her international obligations. Furthermore, such concession on the
part of China will undoubtedly be followed by demands from other
powers for similar and equal exclusive advantages in other parts of
the Chinese Empire, and the inevitable result must be the complete
wreck of the policy of absolute equality of treatment of all nations
in regard to trade, navigation, and commerce within the confines of
the Empire.

“On the other hand, the attainment by one power of such exclusive
privileges for a commercial organization of its nationality conflicts
with the assurances repeatedly conveyed to this Government by the
Imperial Russian Ministry of Foreign Affairs of the Imperial Govern-
ment’s intention to follow the policy of the Open Door in China, as
advocated by the Government of the United States and accepted by
all the treaty powers having commercial interests in that Empire.”

When, in the following year, the United States learned that Russia
was pressing China for a bilateral convention which would have pro-
hibited treaty ports and foreign consuls in Manchuria and would have
excluded all foreigners except Russians from Chinese public service
in North China, the United States protested to Russia on April 25,
1903, that such action was contrary to the Open Door policy and
injurious to the legitimate interests of the United States in China.
The Sino- American Treaty of Commerce, signed October 8, 1903, re-
affirmed the concept of the Open Door and was accompanied by the
opening of Mukden and Antung in Manchuria to foreign trade, thus
thwarting Russian attempts to close it. 6

The Russo-Japanese War of 1904-1905, which was fought mainly
on Chinese soil, afforded the United States an opportunity to restate
the basic principles of its China policy. Upon the outbreak of the war,
Hay on February 10, 1904, appealed to both belligerents to limit as
much as possible their military operations and to respect the neu-
trality and “administrative entity” of China. 7 Subsequently he cir-
cularized the Powers in the interests of the integrity of China and the
Open Door in the Orient on J anuary 13, 1905 :

“It has come to our knowledge that apprehension exists on the part
of some of the powers that in the eventual negotiations for peace
between Russia and Japan claim may be made for the concession of
Chinese territory to neutral powers. The President would be loathe
to share this apprehension, believing that the introduction of ex-
traneous interests would seriously embarrass and postpone the settle-

# See annex 6.

7 See annex 7.

A CENTURY OF AMERICAN POLICY

5

ment of the issues involved in the present contest in the Far East, thus
making more remote the attainment of that peace which is so earnestly
to be desired. For its part, the United States has repeatedly made
its position well known, and has been gratified at the cordial welcome
accorded to its efforts to strengthen and perpetuate the broad policy
of maintaining the integrity of China and the ‘open door’ in the Orient,
whereby equality of commercial opportunity and access shall be en-
joyed by all nations. Holding these views the United States disclaims
any thought of reserved territorial rights or control in the Chinese
Empire, and it is deemed fitting to make this purpose frankly known
and to remove all apprehension on this score so far as concerns the
policy of this nation, which maintains so considerable a share of the
Pacific commerce of China and which holds such important posses-
sions in the western Pacific, almost at the gateway of China.” 8
President Theodore Roosevelt offered his good offices to bring about
peace negotiations between Russia and Japan. The resultant Treaty
of Portsmouth, September 5, 1905, pledged the two signatories to
restore Manchuria to China and to observe measures “which apply
equally to all nations” in the commerce and industry of Manchuria.

THE ROOT-TAKAHIRA AGREEMENT, 1908

A few years later, in an exchange of notes between the Secretary
of State and the Japanese Ambassador in Washington, Japan sub-
scribed to the twin principles of United States policy toward China.
By the Root-Takahira Agreement, November 30, 1908, the United
States and Japan mutually agreed (1) to maintain the status quo
in the Pacific and to respect each other’s territorial possessions in that
region; (2) to uphold the Open Door in China; and (3) to support
by pacific means the “independence and integrity of China.” 9

THE KNOX ^NEUTRALIZATION” PROPOSALS, 1909

In an effort to strengthen the Open Door principle and at the same
time to discourage the further penetration of Manchurian trade and
commerce by Russia and Japan, the United States suggested in 1909
that the Manchurian railroads be taken out of international politics.
President Taft and Secretary of State Knox saw that the territorial
integrity and political independence of China in Manchuria were being
menaced by the railway concessions granted to Japan and Russia, and
were convinced that this was contrary to the spirit and letter of the
Open Door. Knox circularized the Powers in November-December
1909 as follows :

8 See annex 8.

9 See annex 9.

6

U. S. RELATIONS WITH CHINA

“Perhaps the most effective way to preserve the undisturbed en-
joyment by China of all political rights in Manchuria and to promote
the development of those Provinces under a practical application of
the policy of the Open Door and equal commercial opportunity would
be to bring the Manchurian highways, the railroads, under an economic,
scientific, and impartial administration by some plan vesting in China
the ownership of the railroads through funds furnished for that pur-
pose by the interested powers willing to participate.”

Knox also proposed that the nationals of the participating Powers
should supervise the railroad system during the term of the loan, and
that the Governments concerned should enjoy for such period “the
usual preferences for their nationals and materials” upon an equitable
basis among themselves. 10 Great Britain, Germany, and China
indicated a willingness to accede in principle to the Knox proposal,
which was almost brutally rebuffed by Russia and J apan. The result
of the Knox neutralization scheme was to draw Russia and J apan more
closely together in defense of their interests in Manchuria and Inner
Mongolia. Although using the language of the Open Door and the
territorial integrity of China, they entered into treaty engagements
on July 4, 1910, and June 25, 1912, which in effect seemed designed
ultimately to close the door to others and to threaten the integrity
of China.

III. WORLD WAR I AND POST-WAR SETTLE-
MENTS

HOSTILITIES IN CHINA

World War I had repercussions in China even prior to the Chinese
declaration of war (August 14, 1917) against Germany. At the out-
break of the war China, on August 3, 1914, asked the United States to
assist in preventing the spread of hostilities to Chinese soil, where
the belligerents had foreign settlements and leased areas. The United
States accepted this request and informed the British Government on
August 11, 1914, of the American “desire to preserve the status quo
in China.” When Japan entered the war against Germany, Secretary
of State Bryan on August 19, 1914, informed the Japanese Govern-
ment that the United States “notes with satisfaction that Japan, in
demanding the surrender by Germany of the entire leased territory of
Kiaochow does so with the purpose of restoring that territory to
China, and that Japan is seeking no territorial aggrandizement in
China.” Bryan reminded Japan of its pledge to support “the inde-

10 See annex 10.

A CENTURY OF AMERICAN POLICY

7

pendence and integrity of China and the principle of equal opportuni-
ties for the commerce and industry of all nations in China” as con-
tained in the Root-Takahira Agreement of November 30, 1908.

THE TWENTY-ONE DEMANDS, 1915

Early in 1915 Japan secretly presented to China the Twenty-One
Demands, which, if accepted in full, would have made China a virtual
protectorate of Japan. Not only did the Japanese Government de-
mand further economic and political rights in Manchuria, Shantung,
and Inner Mongolia, but it also sought exclusive mining and indus-
trial rights in the Yangtze valley and actually demanded supervisory
control over Chinese social and political institutions, including not
only schools and churches but even the Government itself. When the
United States learned of the Demands it took the opportunity to re-
affirm its traditional policy toward China. In a note of March 13,
1915, to the Japanese Ambassador in Washington Bryan reviewed
American policy since the Open Door notes of 1899, called attention
to the various international undertakings concerning China, and
argued that Japan’s Demands were inconsistent with its past pro-
nouncements regarding the sovereignty of China. The Secretary
stated that the United States relied upon the “repeated assurances” of
Japan in regard to “the independence, integrity and commerce of
China” and on Japan’s taking “no steps” which would be “contrary to
the spirit of those assurances.” The Secretary pointed out that the
activity of Americans in China “has never been political, but on the
contrary has been primarily commercial with no afterthought as to
their effect upon the governmental policy of China.” Bryan also
stated :

“While on principle and under the treaties of 1844, 1858, 1868 and
1903 with China the United States has grounds upon which to base
objections to the Japanese ‘demands’ relative to Shantung, South
Manchuria, and East Mongolia, nevertheless the United States frankly
recognizes that territorial contiguity creates special relations between
Japan and these districts.”

The Secretary asserted, however, that the United States “could not
regard with indifference the assumption of political, military or
economic domination over China by a foreign Power”, and expressed
the hope that Japan would find it consonant with its interests “to
refrain from pressing upon China an acceptance of proposals which
would, if accepted, exclude Americans from equal participation in the
economic and industrial development of China and would limit the
political independence of that country.” The Secretary concluded his

8

U. S. RELATIONS WITH CHINA

note with the statement that the policy of the United States “is
directed to the maintenance of the independence, integrity and com-
mercial freedom of China and the preservation of legitimate American
rights and interests in that Republic.” 11

Despite these expressed American views and Chinese resistance,
Japan persisted and forced China, under the pressure of an ultimatum,
to agree to revised Demands which represented a retreat from the
extreme position taken when the original Demands were put forth.
Thereupon Bryan notified both Tokyo and Peking in identic notes
on May 11, 1915, that the United States “cannot recognize any agree-
ment or undertaking which has been entered into or which may be
entered into between the Governments of Japan and China, impair-
ing the treaty rights of the United States and its citizens in China,
the political or territorial integrity of the Republic of China, or the
international policy relative to China commonly known as the Open
Door policy”. 12

THE LANSING-ISHII AGREEMENT, NOVEMBER 2, 1917

As a result of its entrance into World War I, the United States
found itself associated with Japan. Once more the two Powers
sought to record a joint policy toward China, which had declared
war against Germany on August 14, 1917, by an exchange of notes
between the American Secretary of State and the Japanese Special
Ambassador. By the Lansing-Ishii Agreement of November 2, 1917,
the United States and Japan reaffirmed their respect for the principles
of the Open Door and the independence and territorial integrity of
China. The Agreement read in part :

“The Governments of the United States and Japan recognize that
territorial propinquity creates special relations between countries,
and consequently the Government of the United States recognizes that
J apan has special interests in China, particularly in the part to which
her possessions are contiguous.

“The territorial sovereignty of China, nevertheless, remains unim-
paired, and the Government of the United States has every confidence
in the repeated assurances of the Imperial Japanese Government that
while geographical position gives Japan such special interests they
have no desire to discriminate against the trade of other nations or to
disregard the commercial rights heretofore granted by China in
treaties with other powers.” 13

11 See annex 11.

u See annex 12.

18 See annex 13.

A CENTURY OF AMERICAN POLICY

9

By a secret protocol, withheld from the published exchange of notes,
but which the United States considered an inseparable part of the
Agreement, the two Powers agreed that they would “not take advan-
tage of the present conditions to seek special rights or privileges in
China which would abridge the rights of the subjects or citizens of
other friendly states.” The Lansing-Ishii Agreement was formally
annulled by an exchange of notes, dated April 14, 1923, following the
coming into force of the Nine-Power Treaty.

SETTLEMENT OF THE SHANTUNG QUESTION

At the Washington Conference of 1921-1922 the United States, in
concert with the United Kingdom, exercised its good offices in bringing
about a settlement of the Shantung controversy between China and
Japan. Early in World War I Japan seized the German leased terri-
tory of Kiaochow Bay and subsequently extended its control over the
entire Shantung peninsula. Japan promised ultimately to restore
Shantung Province to the sovereignty of China. During the war, how-
ever, Japan managed, through various treaties, to obtain recognition of
its dominant position in Shantung by China and the Allies. At the
Paris Peace Conference in 1919 China demanded the return of the
German leasehold and German economic privileges in the province.
Japan, on the other hand, insisted upon a treaty clause which would
recognize Japanese succession to all German rights and privileges,
including the railway, in Shantung. The American Delegation at
Paris supported China, protested against the transfer, and offered an
alternative plan to cede the former German holdings to the Allied
and Associated Powers, which were to make the proper disposition
of them later. President Wilson was not able to hold out against
the Japanese demands, and a clause was included in the Treaty of
Versailles by which Germany renounced in favor of Japan its rights
in Shantung. China thereupon refused to sign the treaty. The con-
troversy was not resolved during the intervening years. At the
Washington Conference the Chinese and Japanese delegates met with
British and American observers to consider the problem. As a result
of these direct negotiations Japan and China signed a treaty on
February 4, 1922, which provided for the restoration of Shantung in
full sovereignty to China, and for the purchase by China of the
Tsingtao-Tsinan Railway with funds obtained from Japanese bankers
in the form of a fifteen-year loan secured by a lien on the railroad.
The reassertion of Chinese sovereignty over Shantung, achieved with
United States assistance, was a considerable victory for China, al-
though the terms of the Japanese railway loan did not greatly disturb
Japan’s economic supremacy in that province.

10

U. S. RELATIONS WITH CHINA

THE NINE-POWER TREATY, FEBRUARY 6, 1922

After the close of World War I the United States succeeded in hav-
ing the twin principles of its policy toward China written into a
treaty. The Powers participating in the Washington Conference
signed the Nine-Power Treaty on February 6, 1922. The signatories,
other than China, agreed to respect the sovereignty, the independence,
and the territorial and administrative integrity of China, and to up-
hold the principle of the Open Door. The Powers, other than China,
also agreed “to refrain from taking advantage of conditions in China
in order to seek special rights or privileges which would abridge the
rights of subjects or citizens of friendly states, and from countenancing
action inimical to the security of such states.” 14

Mention should be made of the related naval arrangements con-
cluded at the Washington Conference. The Five-Power Naval
Treaty, signed on February 5, 1922, provided for the reduction and
limitation of naval forces, including those of the United States in the
Pacific which, together with the provision for the non-fortification of
United States possessions in the Far East, gave evidence that the
policy and purpose of the United States in the Far East was only
defensive.

By the Nine-Power Treaty traditional American policy was given a
broad, nine-power base. This treaty provided a sort of charter gov-
erning the relations between China and the Powers for almost two
decades. The treaty was one of the principal points at issue with
Japan after the seizure of Manchuria in 1931-1933, and was the subject
of the Brussels Conference called in 1937 pursuant to a League of
Nations resolution after the outbreak of the undeclared war between
Japan and China. The Brussels Conference, supported by the United
States, adopted a resolution on November 24, 1937, which, after re*
viewing Far Eastern developments since the Washington Conference,
reaffirmed the principles of the Nine-Power Treaty “as being among
the basic principles which are essential to world peace and orderly
progressive development of national and international life.” The
Brussels Conference recommended suspension of hostilities between
Japan and China and expressed the hope, which was not realized, that
the conference might be reconvened at a later date.

IV. NON-INTERFERENCE IN CHINESE INTERNAL
AFFAIRS — THE WASHINGTON CONFERENCE
AND AFTER

The Nine-Power Treaty of February 6, 1922, also contained a pro-
vision by which the signatory Powers, other than China, agreed “to

14 See annex 14.

A CENTURY OF AMERICAN POLICY

11

provide the fullest and most unembarrassed opportunity to China to
develop and maintain for herself an effective and stable government”.
This was in accordance with the long-held view of the United States
that China should be given time to progress along the road of national
development. The United States sympathized with the efforts of
Chinese people to achieve those political institutions which would best
meet their needs in the modern world and had followed a policy of
strict neutrality on internal Chinese developments. When the Manchu
dynasty had been challenged by the Republican revolution in October
1911, the United States had maintained its neutrality in the incipient
civil war and had helped neither the recognized government at Peking
nor the Republican revolutionists in the Yangtze Valley. Following
the abdication of the Manchus, the Chinese Republic was established on
February 12, 1912. De jure recognition by the United States of the
Republican Government followed on May 2, 1913.

STATEMENT BY SECRETARY KELLOGG, JANUARY 27, 1927

Subsequently in the 1920’s when the Chinese Nationalists, under the
leadership of the Kuomintang, were driving northward through the
Yangtze Valley in an effort to unite all China, Secretary of State Frank
B. Kellogg restated American sympathy with Chinese nationalism
and the American policy of non-interference in the internal affairs
of China. The statement by the Secretary of State, made public on
J anuary 27, 1927, said in part :

“The United States has always desired the unity, the independence
and prosperity of the Chinese nation. It has desired that tariff
control and extraterritoriality provided by our treaties with China
should as early as possible be released

“The Government of the United States has watched with sympathetic
interest the nationalistic awakening of China and welcomes every
advance made by the Chinese people toward reorganizing their sys-
tem of Government.

“During the difficult years since the establishment of the new regime
in 1912, the Government of the United States has endeavored in every
way to maintain an attitude of the most careful and strict neutrality
as among the several factions that have disputed with one another for
control in China. . . . This Government wishes to deal with China in
a most liberal spirit. It holds no concessions in China and has never
manifested any imperialistic attitude toward that country. It desires,
however, that its citizens be given equal opportunity with the citizens
of the other Powers to reside in China and to pursue their legitimate

12

U. S. RELATIONS WITH CHINA

occupations without special privileges, monopolies or spheres of special
interest or influence.” 15

Following the Nanking “incident” of March 24, 1927, when for-
eigners were subjected to indignities at the hands of Chinese National-
ist forces and were rescued by Western gunboats, the United States
strove to settle the matter in such a way as to compensate the Powers
for the injuries resulting from the civil strife, but without punitive
measures against the Chinese nation. Chinese xenophobia had pre-
vious manifestations, the Boxer Rebellion in 1900 being the best-
known example. Sporadic outbreaks of anti-foreignism occurred in
various parts of China during the Chinese Nationalist movement of
the 1920’s. Despite these manifestations of Chinese xenophobia the
United States dealt sympathetically with the new regime, made its
peace with the new central government, and ultimately extended
recognition to it.

RECOGNITION OF THE NATIONAL GOVERNMENT, 1928

After China had achieved a degree of unity under the Kuomintang
leadership of General Chiang Kai-shek, the United States recognized
the National Government of the Republic of China on July 25, 1928,
by concluding with that Government a treaty restoring tariff autonomy
to China — the first nation to do so. 16 In connection with the nego-
tiation of this treaty Mr. Kellogg stated :

“The good will of the United States toward China is proverbial and
the American Government and people welcome every advance made
by the Chinese in the direction of unity, peace and progress. We do
not believe in interference in their internal affairs. We ask of them
only that which we look for from every nation with which we main-
tain friendly intercourse, specifically, proper and adequate protection
of American citizens, their property and their lawful rights, and, in
general, treatment in no way discriminatory as compared with the
treatment accorded to the interests or nationals of any other country.”

V. THE SINO-SOVIET DISPUTE IN 1929

As the tide of Chinese nationalism swept northward in 1928 and 1929
it came into conflict with the rights and privileges of the Soviet Union
in Manchuria. In mid-1929 a dispute developed between China and
the Soviet Union over the Chinese Eastern Railway in Manchuria.
The United States immediately took the lead in attempting to achieve

u See annex 15.

” See annex 16.

A CENTURY OF AMERICAN POLICY

13

a peaceful solution. The efforts of Secretary of State Stimson failed
to arrest intermittent armed clashes along the Manchurian border. In
mid-November Russian troops invaded Manchuria in force.

Eventually, following direct negotiations, the U.S.S.R. and China
on December 22, 1929, signed a Protocol under which the controversy
was settled on the basis of restoring the statics quo ante , and the Soviet
Union retained the special privileges in the Chinese Eastern Railway
zone originally acquired by the Czarist Government in the 1890 ’s but
subsequently redefined in the Sino-Soviet Treaties of 1924.

VI. JAPANESE EXPANSION INTO CHINA FROM

1931

THE NON-RECOGNITION DOCTRINE OF SECRETARY STIMSON

When Japan embarked upon a policy of forcible expansion in Man-
churia in September 1931, the United States in cooperation with the
League of Nations, of which it was not a member, sought a peaceful
solution of the controversy.

As it became evident that Japan was determined to persist in its
course of conquest, Mr. Stimson addressed notes to both Japan and
China on January 7, 1932, in which he announced the policy of non-
recognition of territorial changes brought about by force. In identic
notes the Secretary informed the two Powers that the United States
“cannot admit the legality of any situation de facto nor does it intend
to recognize any treaty or agreement entered into between those
Governments, or agents thereof, which may impair the treaty rights of
the United States or its citizens in China, including those which
relate to the sovereignty, the independence, or the territorial and
administrative integrity of the Republic of China, or to the inter-
national policy relative to China, commonly known as the open door
policy ; and that it does not intend to recognize any situation, treaty or
agreement which may be brought about by means contrary to the
covenants and obligations of the Pact of Paris of August 27, 1928,
to which Treaty both China and Japan, as well as the United States,
are parties.” 17

After hostilities had been extended to Shanghai and Manchurian
independence had been proclaimed, Mr. Stimson sought world-wide
support for this position in a letter to Senator Borah, Chairman of
the Senate Committee on Foreign Relations, dated February 23, 1932,
which was made public the next day. At the same time the Secretary
reaffirmed the policy of his predecessor as regards American sympathy

17 See annex 17.

14

tJ. S. RELATIONS WITH CHINA

with Chinese nationalism and non-interference in Chinese internal
affairs. After tracing the development of traditional United States
policy toward China since the turn of the century, Mr. Stimson
commented on the principles underlying the Nine-Power Treaty as
follows :

“This Treaty thus represents a carefully developed and matured
international policy intended, on the one hand, to assure to all of the
contracting parties their rights and interests in and with regard to
China, and on the other hand, to assure to the people of China the
fullest opportunity to develop without molestation their sovereignty
and independence according to the modern and enlightened standards
believed to maintain among the peoples of this earth. At the time
this Treaty was signed, it was known that China was engaged in an
attempt to develop the free institutions of a self-governing republic
after her recent revolution from an autocratic form of government;
that she would require many years of both economic and political
effort to that end ; and that her progress would necessarily be slow.
The Treaty was thus a covenant of self-denial among the signatory
powers in deliberate renunciation of any policy of aggression which
might tend to interfere with that development. It was believed— and
the whole history of the development of the ‘Open Door’ policy reveals
that faith — that only by such a process, under the protection of such
an agreement, could the fullest interests not only of China but of all
nations which have intercourse with her best be served.”

In stressing the obligations assumed by the signatories of the
Nine-Power Treaty, Mr. Stimson pointed out that it was but one of
several “interrelated and interdependent” treaties negotiated at the
Washington Conference. He stated that the “willingness of the
American Government to surrender its then commanding lead in
battleship construction and to leave its positions at Guam and in the
Philippines without further fortifications, was predicated upon,
among other things, the self-denying covenants contained in the Nine-
Power Treaty which assured the nations of the world not only of
equal opportunity for their Eastern trade but also against the military
aggrandizement of any other power at the expense of China.” Calling
attention to the enlightened principles embodied in the Kellogg-
Briand Pact and the Nine-Power Treaty, Secretary Stimson continued :
“We believe that this situation would have been avoided had these
covenants been faithfully observed, and no evidence has come to us to
indicate that a due compliance with them would have interfered
with the adequate protection of the legitimate rights in China of the
signatories of those treaties and their nationals.” He suggested that

A CENTURY OF AMERICAN POLICY

15

the rest of the world join the United States in applying the non-
recognition principle to “any situation, treaty or agreement entered
into” by Japan and China “in violation of the covenants of these
treaties, which affect the rights of our Government or its citizens in
China.” If other Governments were to do so “a caveat will be placed
upon such action which, we believe, will effectively bar the legality
hereafter of any title or right sought to be obtained by pressure or
treaty violation.”

The Secretary concluded his letter with the statement :

“In the past our Government, as one of the leading powers on the
Pacific Ocean, has rested its policy upon an abiding faith in the future
of the people of China and upon the ultimate success in dealing with
them of the principles of fair play, patience, and mutual goodwill.
We appreciate the immensity of the task which lies before her states-
men in the development of her country and its government. The
delays in her progress, the instability of her attempts to secure a re-
sponsible government, were foreseen by Messrs. Hay and Hughes and
their contemporaries and were the very obstacles which the policy of
the Open Door was designed to meet. We concur with those states-
men, representing all the nations, in the Washington Conference who
decided that China was entitled to the time necessary to accomplish
her development. We are prepared to make that our policy for the
future.” 18

The non-recognition principle enunciated by Secretary Stimson,
which was also accepted by the League of Nations, remained the basis
of United States policy and was reaffirmed on numerous occasions
during the years between the time of its enunciation and American
involvement in World War II following the Japanese attack on Pearl
Harbor.

DEFENSE OF AMERICAN TREATY RIGHTS IN CHINA

The United States continued in the following years to assert its treaty
rights in China in the face of the extension of Japanese activities.
When a Japanese Foreign Office spokesman (Mr. Eiji Amau) issued
a statement on April 17, 1934, proclaiming (1) Japanese “special re-
sponsibilities in East Asia” and (2) Japanese political guardianship
of China, and warning the Powers against financial, political, or com-
mercial undertakings prejudicial to Japanese interests in China, the
United States quickly replied. In a carefully worded note delivered
in Tokyo on April 29, 1934, the United States reaffirmed its treaty

18 See annex 18.

16

U. S. RELATIONS WITH CHINA

rights. Secretary Hull restated American policy toward China as
follows :

“The relations of the United States with China are governed, as
are our relations with Japan and our relations with other countries,
by the generally accepted principles of international law and the pro-
visions of treaties to which the United States is a party. In interna-
tional law, in simple justice, and by virtue of treaties, the United States
has with regard to China certain rights and certain obligations. In
addition, it is associated with China or with Japan or with both, to-
gether with certain other countries, in multilateral treaties relating
to rights and obligations in the Far East, and in one great multilateral
treaty to which practically all the countries of the world are parties.

“Entered into by agreement, for the purpose of regulating relations
between and among nations, treaties can lawfully be modified or be
terminated — but only by processes prescribed or recognized or agreed
upon by the parties to them.

“In the international associations and relationships of the United
States, the American Government seeks to be duly considerate of the
rights, the obligations and the legitimate interests of other countries,
and it expects on the part of other governments due consideration of
the rights, the obligations and the legitimate interests of the United
States.

“In the opinion of the American people and the American Govern-
ment, no nation can, without the assent of the other nations concerned,
rightfully endeavour to make conclusive its will in situations where
there are involved the rights, the obligations and the legitimate inter-
ests of other sovereign states.”

During this time the puppet regime in Manchuria planned to estab-
lish an official monopoly, the Manchurian Petroleum Company, for
the distribution of oil products in Manchuria. The United States
protested to Tokyo on July 7, 1934, and asked the Japanese Govern-
ment to “use its influence to discourage the adoption by the Manchurian
authorities of measures which tend to violate the principle of the Open
Door and the provisions of various treaties which the authorities in
Manchuria have agreed to respect.” A number of notes on the subject
were exchanged in the following months in which the Japanese Gov-
ernment refused to accept responsibility for the actions of the Man-
churian officials, while the United States continued to maintain the
principle of the Open Door. Finally, the United States summarized
its position in this controversy in a note to the Japanese Government,
dated April 15, 1935, as follows :

A CENTURY OF AMERICAN POLICY

17

“The American Government greatly regrets that the Japanese Gov-
ernment has not seen its way clear to use the influence which it
possesses through its close and peculiar relations with the present
regime in Manchuria to uphold in practice the principle of the Open
Door and the fulfillment of the treaty obligations which both the
Japanese Government and the authorities in Manchuria have on
numerous occasions declared that they would maintain.

. . the American Government is constrained to express its con-
sidered view that upon the Japanese Government must rest the ulti-
mate responsibility for injury to American interests resulting from
the creation and operation of the petroleum monopoly in Manchuria.”

STATEMENT BY SECRETARY HULL, DECEMBER 5, 1935

Japan persisted in penetrating deeper into China. The attempt by
Japan, late in 1935, to convert the five northern provinces of Hopei,
Chahar, Suiyuan, Shansi, and Shantung into an autonomous area
caused no change in the American attitude. In a statement to the
press on December 5, 1935, Mr. Hull reiterated the position of the
United States :

“Unusual developments in any part of China are rightfully and
necessarily of concern not alone to the Government and people of
China but to all of the many powers which have interests in China.
For, in relations with China and in China, the treaty rights and the
treaty obligations of the ‘treaty powers’ are in general identical. The
United States is one of those powers.

“In the area under reference the interests of the United States are
similar to those of other powers. In that area there are located, and
our rights and obligations appertain to, a considerable number of
American nationals, some American property, and substantial Ameri-
can commercial and cultural activities. The American Government
is therefore closely observing what is happening there.

“Political disturbances and pressures give rise to uncertainty and
misgiving and tend to produce economic and social dislocations. They
make difficult the enjoyment of treaty rights and the fulfillment of
treaty obligations.

“The views of the American Government with regard to such
matters not alone in relation to China but in relation to the whole
world are well known. As I have stated on many occasions, it seems
to this Government most important in this period of world-wide po-
litical unrest and economic instability that governments and peoples
keep faith in principles and pledges. In international relations there
must be agreements and respect for agreements in order that there

18

U. S. RELATIONS WITH CHINA

may be the confidence and stability and sense of security which are
essential to orderly life and progress. This country has abiding faith
in the fundamental principles of its traditional policy. This Gov-
ernment adheres to the provisions of the treaties to which it is a party
and continues to bespeak respect by all nations for the provisions of
treaties solemnly entered into for the purpose of facilitating and regu-
lating, to reciprocal and common advantage, the contacts between
and among the countries signatory.” 19

VII. THE JAPANESE UNDECLARED WAR OF 1937

At the start of the undeclared war of Japan in China, following a
clash between Japanese and Chinese troops on July 7, 1937, at the
Marco Polo Bridge outside Peiping, Mr. Hull urged a policy of self-
restraint upon the Japanese Government. On July 16, 1937, the Sec-
retary issued a statement on fundamental principles of international
policy containing the precepts advocated by the United States in inter-
national relations which were applicable to the Sino- Japanese con-
troversy. The statement by Mr. Hull enumerated such principles as
maintenance of peace; abstinence from the use of force in relations
between states; abstinence from interference in the internal affairs
of other nations ; adjustment of problems in international relations by
processes of peaceful negotiation and agreement ; faithful observance
of international agreements ; modification of provisions of treaties by
orderly processes carried out in a spirit of mutual helpfulness and
accommodation; respect by all nations for the rights of others and
performance by all nations of established obligations ; promotion of
economic security and stability throughout the world; and effective
equality of commercial opportunity and application of the principle
of equality of treatment. These principles were reaffirmed in a later
statement issued by the Department of State on August 23, 1937, in
which it was made clear that the United States regarded these prin-
ciples as being applicable to the Pacific area.

During the interval between the first and second statements men-
tioned above, the United States sought ways and means of bringing
about an amicable settlement between China and Japan. Besides
urging both disputants to seek a peaceful solution the United States
on August 10, 1937, informally offered its good offices to Japan in an
effort to settle the controversy. This offer contemplated providing
neutral ground where Japanese and Chinese representatives might
meet to negotiate, and giving assistance in adjusting the difficulties

19 See annex 19.

A CENTURY OF AMERICAN POLICY

19

which might develop during the negotiations. As Japan did not
respond to the offer, the United States Government felt that no useful
purpose would he served in making a similar approach to the Chinese
Government.

THE “QUARANTINE’’ SPEECH OF PRESIDENT ROOSEVELT

OCTOBER 5, 1937

As Japanese military operations in China increased in intensity it
became evident that Japan was bent upon solving the controversy by
force. In an address delivered at Chicago on October 5, 1937, Presi-
dent Roosevelt, without mentioning any Power by name, condemned
the Japanese resort to undeclared war against China. The President
cited the spreading “epidemic of world lawlessness” and drew the
parallel that in case of an epidemic of physical disease the community
joins in a “quarantine” of the patients in order to protect the health
of the community against the spread of the disease. The President
stated that war was a “contagion whether it be declared or undeclared”,
and that it “can engulf states and peoples remote from the original
scene of hostilities.” The following day the Department of State
underscored American sympathy with China by issuing a statement
which said in part :

“In the light of the unfolding developments in the Far East, the
Government of the United States has been forced to the conclusion
that the action of Japan in China is inconsistent with the principles
which should govern the relationships between nations and is con-
trary to the provisions of the Nine-Power Treaty of February 6, 1922,
regarding principles and policies to be followed in matters concerning
China, and to those of the Kellogg-Briand Pact of August 27, 1928.” 20

DEFENSE OF THE PRINCIPLE OF THE OPEN DOOR

During the undeclared war the United States on numerous occasions
protested against the violation of its treaty rights in China by Japan.
The United States included within the term “treaty rights” protection
of American missionaries and their property, as well as protection of
Americans engaged in commercial activity. In the course of thfeir
campaigns, Japan’s military forces frequently violated American mis-
sionary property either by outright seizure for occupation purposes or
by bombing and shelling of the property. It appeared that Japanese
violation of American missionary property was part of a deliberate
attempt to eradicate American cultural influence in China, inasmuch as

See annex 20.

20

U. S. RELATIONS WITH CHINA

American missionaries, through their religious, educational, and medi-
cal work, had played a very large part in spreading Western concepts
of thought ever since the opening of China to intercourse with the
West, and in developing a close cultural tie between the United States
and China. Although the mission stations, frequently located in the
interior, were for the most part conspicuously marked with the Ameri-
can flag, the J apanese usually disregarded such marking. The United
States protested these violations of American property in China, but
received as little satisfaction from the Japanese Government on this
aspect as it had in answer to its protests on violations of commercial
interests.

In a note to J apan, dated October 6, 1938, the United States called
attention to the “categorical assurances” given by the Japanese Gov-
ernment that the Open Door would be maintained in China. The note
reviewed numerous instances in which actions by Japanese agencies in
China had contravened these assurances and interfered with American
treaty rights in China. The note closed with a request that Japan
implement its “assurances already given with regard to the main-
tenance of the Open Door and to non-interference with American
rights” by taking the following effective measures :

“1. The discontinuance of discriminatory exchange control and of
other measures imposed in areas in China under Japanese control
which operate either directly or indirectly to discriminate against
American trade and enterprise ;

“2. The discontinuance of any monopoly or of any preference which
would deprive American nationals of the right of undertaking any
legitimate trade or industry in China or of any arrangement which
might purport to establish in favor of Japanese interests any general
superiority of rights with regard to commercial or economic develop-
ment in any region of China ; and

“3. The discontinuance of interference by Japanese authorities in
China with American property and other rights including such forms
of interference as censorship of American mail and telegrams and
restrictions upon residence and travel by Americans and upon Ameri-
can trade and shipping.” 21

In its reply of November 18, 1938, Japan denied the American con-
tention that Japanese actions in China violated American treaty rights
or discriminated against American interests in China. The note from
the Japanese Foreign Minister to the American Ambassador in Japan
indicated that Japan did not interpret the principle of the Open Door

n See annex 21.

A CENTURY OF AMERICAN POLICY 21

in the same way as did the United States. The reply of the Japanese
Foreign Minister of November 18, 1938, concluded as follows :

“At present Japan, devoting its entire energy to the establishment
of a new order based on genuine international justice throughout East
Asia, is making rapid strides toward the attainment of this objective.
The successful accomplishment of this purpose is not only indispens-
able to the existence of Japan, but also constitutes the very foundation
of the enduring peace and stability of East Asia.

“It is the firm conviction of the J apanese Government that now, at
a time of the continuing development of new conditions in East Asia,
an attempt to apply to present and future conditions without any
changes concepts and principles which were applicable to conditions
prevailing before the present incident does not in any way contribute
to the solution of immediate issues and further does not in the least
promote the firm establishment of enduring peace in East Asia.

“The Imperial Government, however, does not have any intention
of objecting to the participation in the great work of the reconstruc-
tion of East Asia by your Excellency’s country or by other Powers,
in all fields of trade and industry, when such participation is under-
taken with an understanding of the purport of the above stated re-
marks ; and further, I believe that the regimes now being formed in
China are also prepared to welcome such participation.” 22

The American note of December 30, 1938, delivered by the Ambas-
sador in Tokyo to the Japanese Foreign Minister, challenged Japan’s
interpretation of the Open Door principle and reaffirmed the views
contained in the previous communication of October 6, 1938. The
United States again called upon Japan to observe its treaty obliga-
tions. The United States denied that its treaty rights in China could
be abrogated by the unilateral action of Japan, and stressed the fact
that it was always ready and willing to discuss treaty revision by or-
derly processes of negotiation and agreement among the parties thereto.
The note of December 30, 1938, staled :

“The admonition that enjoyment by the nationals of the United
States of non-discriminatory treatment in China — a general and well
established right — is henceforth to be contingent upon an admission
by the Government of the United States of the validity of the concep-
tion of J apanese authorities of a ‘new situation’ and a ‘new order’ in
East Asia, is, in the opinion of this Government, highly paradoxi-
cal. . . .

See annex 22.

22

TJ. S. RELATIONS WITH CHINA

“Whatever may be the changes which have taken place in the situa-
tion in the Far East and whatever may be the situation now, these
matters are of no less interest and concern to the American Govern-
ment than have been the situations which have prevailed there in the
past, and such changes as may henceforth take place there, changes
which may enter into the producing of a ‘new situation’ and a ‘new
order’, are and will be of like concern to this Government. This Gov-
ernment is well aware that the situation has changed. This Gov-
ernment is also well aware that many of the changes have been brought
about by the action of Japan. This Government does not admit, how-
ever, that there is need or warrant for any one Power to take upon it-
self to prescribe what shall be the terms and conditions of a ‘new
order’ in areas not under its sovereignty and to constitute itself the
repository of authority and the agent of destiny in regard
thereto. . . .

“The United States has in its international relations rights and
obligations which derive from international law and rights and obli-
gations which rest upon treaty provisions. Of those which rest on
treaty provisions, its rights and obligations in and with regard to
China rest in part upon provisions in treaties between the United
States and China and in part on provisions in treaties between the
United States and several other powers including both China and
Japan. These treaties were concluded in good faith for the pur-
pose of safeguarding and promoting the interests not of one only but
of all of their signatories. The people and the Government of the
United States cannot assent to the abrogation of any of this country’s
rights or obligations by the arbitrary action of agents or authorities
of any other country.

“The Government of the United States has, however, always been
prepared and is now prepared to give due and ample consideration
to any proposals based on justice and reason which envisage the re-
solving of problems in a manner duly considerate of the rights and
obligations of all parties directly concerned by processes of free nego-
tiation and new commitment by and among all of the parties so con-
cerned. There has been and there continues to be opportunity for
the Japanese Government to put forward such proposals. This Gov-
ernment has been and it continues to be willing to discuss such pro-
posals, if and when put forward, with representatives of the other
powers, including Japan and China, whose rights and interests are
involved, at whatever time and in whatever place may be commonly
agreed upon.

A CENTURY OF AMERICAN POLICY

23

“Meanwhile, this Government reserves all rights of the United
States as they exist and does not give assent to any impairment of any
of those rights.” 28

This and subsequent protests regarding violation of American
treaty rights in China were equally unproductive of positive results.

From the beginning of Japan’s undeclared war the sympathies of
the American people were with China. Despite this fact, and despite
Japanese violations of American treaty rights in China, the United
States continued to sell war supplies to Japan for about two and
a half years after the commencement of Sino- Japanese hostilities in
accordance with the traditional theory of freedom of trade, and the
then existing concepts of neutrality and freedom of the seas. F urther-
more, during these years the United States tried to steer a course
which would not involve it in hostilities in the Far East.

DEFENSE OF CELINE SE INTEGRITY

United States interest in the maintenance of Chinese administrative
integrity under existing arrangements continued unabated through-
out the undeclared war. Beginning in the fall of 1937, the United
States repeatedly made representations to Japan regarding the failure
of the latter to maintain the integrity of the Chinese Maritime Customs
Administration 24 and the Chinese Salt Administration, the revenues
from both of which had been pledged to service foreign loans, includ-
ing American loans. The representations did not deter Japan from
its course, which included setting up various “autonomous” regimes
in those parts of China occupied by the Japanese Army.

Late in 1939 the United States learned that Japan was considering
setting up a Chinese central regime at Nanking under Wang Ching-
wei. The United States took the position that such a regime would
be a purely artificial creation, lacking any broad Chinese popular
support; that it would be designed primarily to serve the special
purposes of Japan; and that it would result in depriving the people
and the Government of the United States, as well as those of other
third countries, of long established rights of equal opportunity and
fair treatment in China which were legally theirs. When the new
regime was set up in March 1940 the United States announced that
it would continue to recognize the National Government of the Re-
public of China whose capital was then at Chungking. In a forceful

33 See annex 23.

34 The United States in 1928 had been the first country to restore tariff
autonomy to China.

24

U. S. RELATIONS WITH CHINA

public statement on March 30, 1940, Mr. Hull denounced the use of
force in setting up the new Chinese regime under Japanese auspices
as follows :

“In the light of what has happened in various parts of China
since 1931, the setting up of a new regime at Nanking has the ap-
pearance of a further step in a program of one country by armed
force to impose its will upon a neighboring country and to block off
a large area of the world from normal political and economic rela-
tionships with the rest of the world. The developments there appear
to be following the pattern of other regimes and systems which have
been set up in China under the aegis of an outside power and which
in their functioning especially favor the interests of that outside power
and deny to nationals of the United States and other third countries
enjoyment of long-established rights of equal and fair treatment which
are legally and justly theirs.

“The Government of the United States has noted statements of
high officials of that outside power that their country intends to re-
spect the political independence and the freedom of the other country
and that with the development of affairs in East Asia this intention
will be demonstrated. To this Government the circumstances, both
military and diplomatic, which have attended the setting up of the
new regime at Nanking do not seem consistent with such an intention.

“The attitude of the United States toward use of armed force as an
instrument of national policy is well known. Its attitude and posi-
tion with regard to various aspects of the situation in the Far East
have been made clear on numerous occasions. That attitude and
position remain unchanged.

“This Government again makes full reservation of this country’s
rights under international law and existing treaties and agreements.” 25

UNITED STATES SUPPORT OF CHINESE RESISTANCE

By way of moral and material support to China in its resistance to
Japan’s undeclared war, the United States gave notice to Japan on
July 26, 1939, of its desire to terminate the Treaty of Commerce and
Navigation between the United States and Japan signed on Febru-
ary 21, 1911. As a result of this action, after January 26, 1940, the
United States was in a position to resort to successive economic meas-
ures against Japan. After the termination of the commercial treaty
the United States increasingly restricted the shipment of oil, scrap
iron, machinery, machine tools, and other war materiel to Japan.
(A moral embargo on the shipment of aircraft, aircraft parts and ac-

See annex 24.

A CENTURY OF AMERICAN POLICY

25

cessories, and aerial bombs to Japan had been in effect since mid-1938.)
On July 26, 1941, President Roosevelt issued an Executive Order
freezing Japanese assets in the United States, thereby virtually cut-
ting off all trade with Japan.

The United States also supported China with positive measures in
its resistance against Japanese conquest. American aviators on active
duty were permitted to enter the Reserves and to join the Chinese
armed forces, a military mission was sent to China, and China was
declared eligible for lend-lease assistance on May 6, 1941. In addi-
tion, there were various economic measures which are discussed later
in this chapter.

AMERICAN- JAPANESE INFORMAL CONVERSATIONS IN 1941

Beginning in the spring of 1941 the United States and Japan en-
tered into informal, exploratory conversations for a comprehensive
and peaceful settlement of the various political and economic prob-
lems of the F ar East. During these conversations, which lasted until
December 7, 1941, an effort was made to draft an agreement containing
the principles on which peace could be maintained in the Pacific area.
The United States remained firm in its conviction that an agreement
should contain the following principles which were to be supported
by both Powers :

1. The principle of the inviolability of territorial integrity and
sovereignty of each and all nations.

2. The principle of non-interference in the internal affairs of other
countries.

3. The principle of equality, including equality of commercial
opportunity and treatment.

4. The principle of reliance upon international cooperation and
conciliation for the prevention and pacific settlement of controversies
and for improvement of international conditions by peaceful methods
and processes. 26

The United States proposed that all Japanese forces in China be
withdrawn, and that the National Government of the Republic of
China be supported — militarily, politically, and economically — as
against any other regime in China. The United States was willing
to reestablish normal trade relations with Japan and to improve
economic relations between the two countries. Japan, on the other
hand, sought to obtain recognition from the United States of Japa-
nese hegemony in the Far East. Among other things, Japan wanted
the United States to discontinue furnishing aid to the Nationalist

062121

See annex 25.

26

U. S. RELATIONS WITH CHINA

regime in Chungking which was resisting Japanese onslaughts. The
United States refusal to stop its support of China and the unwilling-
ness of the United States to compromise on the principle of Chinese
sovereignty were among the immediate motivations of the Japanese
attack upon Pearl Harbor on December 7, 1941. This Japanese ag-
gression abruptly terminated the bilateral informal conversations.

VIII. WORLD WAR II

Following the attack on Pearl Harbor the United States and China
fought side by side against Japan. The United States had already
been giving assistance to China, in accordance with the American
policy of extending aid to nations resisting aggression, but now that
assistance was accelerated and increased in scope. It included lend-
lease, and military and financial assistance.

THE LEND-LEASE PROGRAM, 1941-1943

On March 15, 1941, four days after the passage of the Lend-Lease
Act, President Roosevelt made an address in which he said : “China
likewise expresses the magnificent will of millions of plain people to
resist the dismemberment of their Nation. China, through the Gen-
eralissimo, Chiang Kai-shek, asks our help. America has said that
China shall have our help.” After a lend-lease program to meet the
emergency needs of China had been developed following consultations
between Chinese and American officials, the President, on May 6, 1941,
in accordance with the provisions of the Act, declared the defense of
China to be vital to the defense of the United States. A Master Lend-
Lease Agreement with China was not signed, however, until June 2,
1942. 27

Lend-lease aid to China was begun in 1941, and was aimed par-
ticularly at improving transport over the Burma Road, the only artery
through which goods could flow into unoccupied China. The first
lend-lease shipments consisted primarily of trucks, spare parts, motor
fuel, and lubricants for use on the Burma Road and material for the
development of the highway. At the request of Generalissimo Chiang
Kai-shek a mission of American traffic experts was sent to China in
June 1941, to survey the Burma Road and make recommendations for
increasing traffic over it. On the basis of these recommendations the
Chinese Government undertook a number of measures to improve the
administration of the road. Additional spare parts and repair equip-
ment were furnished to China under lend-lease, and a number of

27 See annex 26 .

A CENTURY OF AMERICAN POLICY

27

American motor-traffic technicians were recruited in the United States
and sent to China at lend-lease expense. The United States also
furnished road-building equipment and asphalt under lend-lease
to assist China in hard-surfacing the Burma Road. As a result of
these efforts and of the arrival of large numbers of American trucks,
the tonnage carried over the Burma Road by November 1941, was
almost four times greater than it had been during the early months of
1941. The quantity of material carried was increased from 4,000 tons
a month at the beginning of 1941 to 15,000 tons in November 1941.

While the capacity of the Burma Road was being expanded, lend-
lease was helping in the attempt to open a second route into China.
During 1941 lend-lease fimds amoimting to 15 million dollars were
allocated to China for use in constructing a railroad from Burma into
China which had been started by the Chinese Government in 1938, and
which would have made possible a great increase in the volume of sup-
plies transported to China through the Burmese port of Rangoon.
The completion of this project was prevented, however, by successful
Japanese military operations in Burma.

The fall of Burma and the seizure of the southern portion of the
Burma Road by the Japanese early in 1942 left air transport as the
only effective means of getting supplies into China. Great progress
was made, particularly during 1943, in the development of an air-
transport route into China. In the month of December 1943, for ex-
ample, twice as much cargo (13,450 short tons) was flown into China as
in all 1942 (5,258 short tons) . In January 1944, the tonnage of goods
flown into China was seven times that of January 1943 — 14,472 short
tons as compared to 1,923 short tons — and the monthly tonnage con-
tinued to increase. It should be pointed out, however, that a very
large proportion of the supplies flown into China during this period
was destined for the United States miiltary forces then operating in
China. Some of this traffic was carried by planes operated by the
China National Aviation Corporation, part of whose fleet of cargo
planes was furnished to China through lend-lease channels. The bulk
of the supplies which were flown from India to China was, however,
transported by the Tenth United States Air Force between April and
December 1942, and subsequently by the United States Air Transport
Command, which, beginning in December 1942, operated a ferry
service 500 miles long between Assam, India and the Yunnan plateau,
over the towering “Hump” of the Himalayas — the most difficult supply
operation of the entire war.

At the same time efforts were made under the lend-lease program
to develop new land supply routes to China. By the end of 1943
American engineers were constructing the Ledo Road from Assam in

28

U. S. RELATIONS WITH CHINA

India across upper Burma to China. (This road, renamed the Stil-
well Road, was finally opened early in 1945.) India became the great
supply base for operations whose objectives were the expulsion of
Japan from Burma and the reopening of land transportation through
that area for supplies for China. Stockpiles in India of material for
China, awaiting shipment as soon as new transportation routes were
opened, were steadily growing by the end of 1943.

The total value of lend-lease supplies transferred to China through
December 31, 1943, amounted to 201 million dollars, of which 175.6 mil-
lion dollars represented goods and 25.4 million dollars represented
services rendered. In addition, goods valued at 191.7 million dollars
were consigned to the American commanding general in the China-
Burma-India Theater for transfer to China. 27a

MILITARY AID, 1941-1943

The United States began to give military aid to China even before
the United States became a belligerent in World War II. The lend-
lease supplies that were provided China between the time of the cutting
of the Burma Road and the end' of 1943 had the effect of greatly in-
creasing this form of assistance. Early in 1941 the United States and
China developed a project under lend-lease for equipping and train-
ing large numbers of Chinese forces. The United States Government
subsequently organized a military mission composed of specialists in
all phases of modern warfare to advise Chinese authorities on the use
of the materials provided in connection with this project. This mis-
sion, which arrived in China in November 1941, was supported by
lend-lease funds.

Unfortunately, little of the equipment intended for China’s ground
forces under this program ever reached its intended destination.
The United States was more successful, however, in furnishing China
with assistance in the air. Early in 1941 this Government approved
a plan which permitted American fighter planes piloted by volunteer
American airmen and serviced by American ground crews to fight
against Japan in the service of China. The American Volunteer
Group (the “Flying Tigers”), under the command of Major General
Claire L. Chennault, was formally constituted as a unit of China’s
armed forces by an order issued by Generalissimo Chiang Kai-shek
on August 1, 1941. During the time that it was in existence the
American Volunteer Group provided an effective air defense for
southwest China and rendered invaluable assistance to hard-pressed
Chinese and other forces in Burma. The American Volunteer Group

* 7a For further information concerning lend-lease and the Lend-Lease Pipeline
Agreements, see chapters V and VII.

A CENTURY OF AMERICAN POLICY

29

was disbanded in July 1942, when its personnel was incorporated into
the United States Tenth Air Force, which had been organized in the
China-Burma-India Theater early in 1942. In recognition of its
increasingly important role the United States air unit in China was
formally activated as the Fourteenth United States Air Force on
March 10, 1943. This force kept control of the air over unoccupied
China, engaged in expanding operations against the Japanese, and
ably performed the vital mission of protecting the terminal bases
of the air transport route into China. The activities of this force
helped to maintain China’s military position and morale throughout
the war.

In addition to furnishing China with fighter planes and pilots, the
United States took steps to put into effect a program for building a
strong and well-equipped Chinese Air Force. In May 1941 an Ameri-
can Air Mission headed by General Clagett was sent to China to
survey the situation. Among other things, the report of the Air
Mission recommended that a program to train Chinese pilots and
mechanics be developed, inasmuch as China did not have enough
men trained to fly or maintain the planes that were needed to defend
China from Japanese air attacks.

Because of the difficulties that would be encountered in trying to
establish aviation training centers in China, a program was developed,
using lend-lease funds, to implement this recommendation by train-
ing Chinese flyers in the United States. In October 1941 the first
group of fifty students arrived in the United States to take the stand-
ard United States Air Force training course for pilots at Thunder-
bird Field in Arizona. Other groups of Chinese pilots came to the
United States for training during the war. The United States Army
also trained Chinese aviation personnel in India.

The program for training Chinese aviation personnel had an im-
portant bearing on operations against Japan. In November 1943
the formation of a Chinese- American Composite Wing of the Chinese
Air Force was announced. This wing, composed of Chinese and
American airmen and ground units and equipped with fighter and
bombing planes, formed the nucleus for a strong Chinese Air Force,
and as the Chinese personnel gained experience the American personnel
was gradually withdrawn.

Soon after its entry into the war, the United States, at the formal
request of the Chinese Government, sent Lieutenant General Joseph
W. Stilwell to China. 2 ™ In addition to being Commanding General
of United States Forces in the China-Burma-India Theater, and of

For the Stimson-Soong exchange of letters with respect to General Stilwell ’s
assignment, see annex 27 (a) and (b).

30

U. S. RELATIONS WITH CHINA

such Chinese troops as Generalissimo Chiang Kai-shek might assign
to him, General Stilwell was also to be Chief of Staff of the Generalis-
simo’s proposed Joint Staff — an Allied staff made up of officers repre-
senting the United States, the United Kingdom, China, and the Neth-
erlands. Although no Allied personnel were ever assigned to this
Joint Staff because of the later change of attitude of the Chinese
Government, nonetheless General Stilwell drew his formal authority
in the Chinese military hierarchy from his continuing position as its
Chief. General Stilwell thus served concurrently with General Ho
Ying-chin, who was Chief of Staff of the Chinese Army, as one of
two Chiefs of Staff to the Generalissimo. Under General Stillwell an
extensive program for equipping and training Chinese ground forces
was undertaken in India, and attempts were made to overcome the
reluctance of the Chinese Government to cooperate in such a program
in China.

At these training centers in India large numbers of Chinese ground
forces were equipped, through lend-lease, with the latest types of
American weapons. Some of the personnel thus trained by American
Army officers demonstrated their combat efficiency in operations in
northern Burma beginning in 1943. This program provided not only
complete tactical units but also cadres for the training of Chinese
divisions beyond the mountains in China proper.

Beginning in April 1943, United States Army officers, each of whom
was a specialist in some phase of modern warfare, also operated
training centers for Chinese officers in China. A field-artillery center,
for example, graduated more than 5,000 officers and an infantry cen-
ter, more than 3,000 officers by the end of the year. American officers
also went into the field with units of the Chinese Army to serve as
instructors, advisers, and observers; and American ordnance officers,
with the assistance of Chinese mechanics, engaged in the work of re-
storing worn Chinese equipment. Mention should also be made of
the American field-hospital units which were sent to China and to
northern Burma to aid the Chinese forces, and of United States
Army engineers and other specialists sent to China to help improve
communications and air-base facilities. The United States Army
also cooperated with Chinese forces in the protection of the advancing
Stilwell Road against Japanese attacks.

United States military assistance up to the end of 1943 made pos-
sible much more effective United States- Chinese combined operations,
ground and air, on the Asian continent in the later stages of World
War II. 270

276 For subsequent military aid, see chapter VII.

A CENTUBY OF AMERICAN POLICY

31

FINANCIAL AID 1937-1943 27,1

United States financial aid to China, like lend-lease and other mili-
tary assistance, antedated the Japanese attack on Pearl Harbor. The
Secretary of the Treasury, using the United States Stabilization Fund,
entered into stabilization agreements in 1937 and 1941 to further the
monetary and financial cooperation of the two Governments and the
stabilization of the United States dollar-Chinese yuan rate of ex-
change. In an agreement of July 14, 1937, with the Central Bank
of China, the Secretary of the Treasury agreed to purchase Chinese
yuan up to an amount equivalent to 50 million dollars, with the proviso
that all such yuan purchased were to be fully collateralized by gold.
By February 1938, yuan equivalent to 48 million United States dollars
had been purchased. Repurchase of this amount was completed by
October 1942.

On April 1, 1941, the Secretary of the Treasury entered into a
second agreement with the Government of China and the Central
Bank of China to purchase Chinese yuan up to an amount equivalent
to 50 million United States dollars. This agreement did not provide
for collateralization of such purchases. It was further agreed at this
time that a Stabilization Board be established, to which the Chinese
Government banks were to contribute 20 million dollars. Purchase of
yuan under this agreement amounted to 10 million dollars, and was
repaid in April 1943.

At approximately the same time China concluded a similar agree-
ment with the United Kingdom by which the latter extended to China
a stabilization loan (£5,000,000) to be administered by the same Sta-
bilization Board. Although the Sino- American and the Sino-British
stabilization agreements were technically distinct, it had been agreed
that all stabilization operations were to be carried on by a single Board
composed of five members : three Chinese, one British, and one
American.

On July 26, 1941, only a few months after the establishment of the
Stabilization Board, the President of the United States issued a
freezing order under whose terms the assets of China and Japan in
the United States were placed under the supervision of the Treasury
Department. The freezing of Chinese funds was undertaken at the
specific request of Generalissimo Chiang Kai-shek. The administra-
tion of the controls with respect to Chinese assets was conducted with
a view to facilitating the operations of the Stabilization Board and
otherwise strengthening the foreign trade and exchange position of the
Chinese Government.

27,1 See annex 28 (parts a-ii).

32

U. S. RELATIONS WITH CHINA

Besides aiding China in its efforts at currency stabilization, the
United States extended credits to China through the Export-Import
Bank. In general these were commodity credits which were used to
purchase a considerable variety of American industrial and agricul-
tural products and services. Credits aggregating 18.9 million dollars
were authorized in 1936 and 1937. Four Export-Import Bank credits
were granted between December 13, 1938, and November 30, 1940,
amounting to 120 million dollars. In accordance with the agreements
governing these four credits payment was made in large part by the
sale to the United States of such Chinese products as tung oil, tin,
tungsten, wolframite, and antimony. The credit had been repaid al-
most entirely by June 30, 1949.

Shortly after the United States became a belligerent in World
War II President Roosevelt, in accordance with a request by the
Generalissimo, asked the Congress to extend further financial aid
to China. In a letter to the Congress dated January 31, 1942, the
President declared : “Responsible officials both of this Government and
of the Government of China have brought to my attention the existence
of urgent need for the immediate extension to China of economic
and financial assistance, going beyond in amount and different in form
from such aid as Congress has already authorized. I believe that such
additional assistance would serve to strengthen China’s position as
regards both her internal economy and her capacity in general to func-
tion with great military effectiveness in our common effort.” The
President enclosed a draft of a joint resolution which he urged Con-
gress to pass authorizing the Secretary of the Treasury, with the ap-
proval of the President, “to loan or extend credit or give other financial
aid to China in an amount not to exceed in the aggregate $500,000,000. ”
The joint resolution was promptly passed by Congress and was signed
by the President on February 7, 1942 (Public Law 442). 28 Less than
a week later the money to implement this resolution was appropriated.
The United States and China signed an agreement on March 21,
1942, establishing this amount as a credit in the name of the Chinese
Government. 284

At the time of the extension of this credit the Japanese offensive in
the Pacific and in southeast Asia was in full swing and land communi-
cations with China were being severed. It was important to the
United States that China should be strengthened and encouraged to
continue the war against Japan. Since opportunities for giving

28 For President Roosevelt's message to Generalissimo Chiang immediately upon
the enactment of Public Law 442, see annex 29 (a).

284 For a fuller treatment of this agreement, see annexes 28 and 29 (b).

A CENTURY OF AMERICAN POLICY

33

effective material aid to China, such as was being rendered to Allies
in more accessible areas through lend-lease, were not great, the 500
million dollar credit was characterized by the Secretary of the Treas-
ury as the “finanial counterpart of lend-leasing war materials.”

The funds provided under the agreement of March 21, 1942, were
used by the Chinese Government mainly to purchase gold for sale in
China as an anti-inflationary measure and to provide backing for the
issuance of Chinese Government savings and victory bonds denom-
inated in United States dollars. A total of 220 million dollars was
withdrawn in gold, much of which was shipped to China, principally
during 1945, to be sold internally in an effort to control inflation by
reducing currency in circulation and keeping down the price of gold.

A total of 200 million dollars was reserved for the redemption of
Chinese Government securities issued in United States dollars — 100
million dollars for payment of Chinese United States dollar savings
certificates, and another 100 million dollars earmarked for the payment
of Chinese United States dollar victory bonds. This earmarking was
abandoned in 1946 and the funds became available for imports and
other foreign payments as measures were promulgated governing pay-
ment of foreign currency bonds held in China which provided that such
bonds would be redeemed in Chinese currency. It was also provided,
however, that registered bond-holders outside China would be paid in
foreign currency.

Of the 80 million dollar balance of this loan the sum of 55 million
dollars was spent for the purchase of bank notes in the United States,
and 25 million dollars for textiles imported into China.

The Chinese Government made use of this credit entirely on its
own initiative and discretion. Efforts had been made to incorporate
in the agreement a clause calling for consultation regarding use of the
credit but the United States Government acceded to strenuous objec-
tions by the Chinese on this point. Although Chinese officials did
offer informal assurances regarding consultation, they seldom availed
themselves of the opportunity for United States advice in this regard
and disregarded that which was obtained.

A more detailed treatment of the origin and uses of this credit, and
of other war-time financial relations between the United States and
China, together with pertinent documents, is attached as an annex. 28b

Final determination of the terms upon which this financial aid was
given was deferred, under the agreement of March 21, 1942, until
after the war.

Mb See annex 28.

34

TJ. S. RELATIONS WITH CHINA

RELINQUISHMENT OF AMERICAN EXTRATERRITORIALITY IN
CHINA

Following the outbreak of war between the United States and
Japan, the United States Government took a number of important
steps which demonstrated the desire and intention of the United
States to treat China as an equal among the Major Powers and to con-
tribute to the strengthening of the Chinese nation.

On October 9, 1942, the United States took the initiative and sug-
gested to China that a treaty be negotiated providing for the relm-
quishment of American extraterritorial rights in China and for the
settlement of related questions. Provisions for such action had been
included in the Sino-American Commercial Treaty of October 8,
1903, Article XV of which had provided :

“The Government of China having expressed a strong desire to
reform its judicial system and to bring it into accord with that of
Western nations, the United States agrees to give every assistance to
such reform and will also be prepared to relinquish extra-territorial
rights when satisfied that the state of the Chinese laws, the arrange-
ments for their administration, and other considerations warrant

it in so doing.”

From that time on, it was the established policy of the United States
to move toward relinquishment of American extraterritorial rights
in China, but during the first quarter of the twentieth century condi-
tions did not warrant such action.

The question of a general relinquishment of extraterritorial juris-
diction in China by the Treaty Powers was brought up at the Wash-
ington Conference in 1921-1922. The Conference adopted a resolution
providing for the establishment of a Commission “to inquire into the
present practice of extraterritorial jurisdiction in China, and into
the laws and the judicial system and the methods of judicial adminis-
tration of China” with a view to making recommendations to the
respective Governments regarding the relinquishment of extra-
territoriality. ...

The Commission on Extraterritoriality met in China in 1926. The
Commission reported its findings of fact as a result of its investiga-
tions into the practice of extraterritorial jurisdiction and into Chinese
laws and the Chinese judicial system and recommended improve-
ments in the Chinese legal, judicial, and prison systems. The Com-
missioners expressed the opinion that “when these recommendations
shall have been reasonably complied with, the several Powers would
be warranted in relinquishing their respective rights of extrater-
ritoriality.” Subsequently, the Chinese Government adopted a pro-

A CENTURY OF AMERICAN POLICY

35

gram with regard to the Chinese judicial system and Chinese prisons
directed toward meeting the recommendations of the Commission.

The United States and China entered into active negotiations in
1930 looking toward the relinquishment of American extraterritorial
rights in China. These discussions were far advanced when in 1931
they were suspended as a consequence of the Japanese military occu-
pation of Manchuria, which was followed by Japanese disruptive
activities in China south of the Great Wall in 1932 and 1935. The
United States was giving renewed favorable consideration to the
question of proceeding toward a relinquishment of extraterritorial
jurisdiction in 1937 when Japan commenced its undeclared war by
invading North China and subsequently Central and South China.

From the Japanese invasion of China in July 1937 until the out-
break of war between the United States and Japan in December 1941,
the extraterritorial system operated to the advantage of the United
States, China, and the other countries opposed to Japanese aggressive
activities, by providing protection for recognized treaty rights which
the Japanese effort at monopoly violated. Although conditions did
not favor taking active steps toward relinquishment of extraterritorial
rights in China, the United States policy remained firm that such steps
should be taken as soon as practicable.

This policy was reaffirmed on several occasions by officials of the
United States Government. In a statement to the press on July 19,
1940, the Acting Secretary of State, Sumner Welles, said:

“It has been this Government’s traditional and declared policy and
desire to move rapidly by process of orderly negotiation and agree-
ment with the Chinese Government, whenever conditions warrant,
toward the relinquishment of extraterritorial rights and of all other
so-called ‘special rights’ possessed by this country as by other coun-
tries in China by virtue of international agreements. That policy
remains unchanged.” 29

In reply to a letter from the appointed Chinese Minister for Foreign
Affairs, Dr. Quo Tai-chi, Secretary Hull wrote, on May 31, 1941 :

“As you are also aware, the Government and people of the United
States have long had a profound interest in the welfare and progress
of China. It goes without saying that the Government of the United
States, in continuation of steps already taken toward meeting China’s
aspirations for readjustment of anomalies in its international rela-
tions, expects when conditions of peace again prevail to move rapidly
by processes of orderly negotiation and agreement with the Chinese
Government, toward relinquishment of the last of certain rights of

** See annex 30.

U. S. RELATIONS WITH CHINA

36

a special character which this country, together with other countries,
has long possessed in China by virtue of agreements providing for
extraterritorial jurisdiction and related practices.” 80

The question of the relinquishment of extraterritorial jurisdiction
in China was included in the informal conversations between the
United States and Japan during 1941. The outline of a proposed
basis for agreement between the two countries which the Secretary
of State handed to the Japanese Ambassador on November 26, 1941,
contained the following provision :

“5. Both Governments will give up all extraterritorial rights in
China, including rights and interests in and with regard to interna-
tional settlements and concessions, and rights under the Boxer
Protocol of 1901.

“Both Governments will endeavor to obtain the agreement of the
British and other governments to give up extraterritorial rights in
China, including rights in international settlements and in conces-
sions and under the Boxer Protocol of 1901.”

Immediately after the outbreak of war between the United States
and Japan in December 1941, all energies were directed toward the
prosecution of the war. While the United Nations were suffering
serious military reverses in the Far East it was felt that any action
toward relinquishment of extraterritorial jurisdiction in China would
have been interpreted widely as a gesture of weakness. Even before
the tide of battle in the Pacific turned in favor of the United Nations,
however, the United States in the spring of 1942 started to give active
consideration to the question of relinquishing extraterritoriality in
China before the termination of hostilities.

After the Japanese thrusts into the Central and Southwest Pacific
had been halted and United Nations forces were on the offensive in
the Pacific and Chinese theaters, the United States took the initiative
and suggested to the Chinese Government on October 9, 1942, that a
treaty be concluded to provide for the relinquishment by the United
States of extraterritorial and related rights in China. On October 24,

1942, the Secretary of State handed the Chinese Ambassador in Wash-
ington a draft text of the proposed treaty. Following negotiations
between the two Governments, the treaty was signed on January 11,

1943, and became effective with the exchange of ratifications on May
20, 1943. 81 This treaty, together with a similar Sino-British treaty
which was negotiated at the same time, was warmly approved by
Chinese leaders.

80 See annex 31.

81 See annex 32.

A CENTURY OF AMERICAN POLICY

37

REPEAL OF CHINESE EXCLUSION ACTS, 1943

As a further indication of American policy, the President, on Decem-
ber 17, 1943, signed an Act, which had been passed by large majorities
of both Houses of Congress, removing long-standing legislative dis-
criminations against Chinese. The Act repealed the Chinese ex-
clusion laws, established an annual Chinese immigration quota, and
made legally admitted Chinese eligible to naturalization as American
citizens. The enactment of this legislation had been specifically
recommended by President Roosevelt in order to “correct an historic
mistake” and give “additional proof that we regard China not only
as a partner in waging war but that we shall regard her as a partner
in days of peace.”

AMERICAN ACKNOWLEDGMENT OF CHINA AS A GREAT POWER

American recognition of the status of China as one of the Great
Powers was demonstrated on two other occasions in the fall of 1943.
The United States insisted that China be included as a signatory,
together with the United Kingdom, the U.S.S.R., and the United
States, of the Declaration of Four Nations on General Security, signed
in Moscow on October 30, 1943, which recognized the right and
responsibility of China to participate jointly with the other great
powers in the prosecution of the war, the organization of the peace,
and the establishment of machinery for post-war international co-
operation . 32 The Cairo Declaration, issued on December 1 , 1943, by
President Roosevelt, Prime Minister Churchill, and Generalissimo
Chiang Kai-shek, following their meeting at Cairo, Egypt, in the
latter part of November 1943, declared their “purpose” that “Man-
churia, Formosa, and the Pescadores shall be restored to the Republic
of China .” 33 On his return from the Cairo Conference President
Roosevelt could say, in his Christmas Eve message to the Nation:
“Today we and the Republic of China are closer together than ever
before in deep friendship and in unity of purpose.”

82 Subsequently China participated as a Great Power in the Dumbarton Oaks
conversations in the summer and fall of 1944, and was one of the sponsoring
Powers of the United Nations Conference on International Organization, which
met at San Francisco in 1945, and which formulated the Charter of the United
Nations. The Charter granted China a permanent seat on the Security Council.

“ See annex 33.

CHAPTER II

A Review of Kuomintang- Chinese
Communist Relations, 1921-1944

I. INTRODUCTION

Various internal factors arising from or influencing the course of the
Chinese revolution have played a major role in the growth and devel-
opment of American policy toward China. The rise of Asiatic nation-
alism, the impact of the West, the loss by the decadent Ch’ing Dynasty
of what the Chinese call the “Mandate of Heaven,” and the consequent
struggle for succession to power have all been factors which inevitably
modified and conditioned the efforts of the United States to conduct its
relations with China in accordance with its traditional policies out-
lined in chapter I.

It is impossible here to analyze all these factors ; but it is necessary
at this point, if one is to understand the course and purposes of Ameri-
can actions in China since 1944, to pause and review at least in outline
the long and tortuous relationship between the Kuomintang and the
Chinese Community Party. This struggle for the acquisition and re-
tention of power has played a major role in the internal Chinese scene
for a quarter of a century, even at the expense of the prosecution of the
war against Japan ; it has been utilized by Major Powers in the pursuit
of their own objectives and rivalries and in turn has affected them;
and it has been a significant influence on the course of relations be-
tween China and the various Powers. In the crowded events of the
last few years and the bitter readjustments of the postwar period it is
easy to forget the origins and development of the Kuomintang-Com-
munist struggle for supremacy ; but they must be recalled if one is to
understand and place in proper perspective the course of American
policy since V-J Day. This struggle has had a great effect on Ameri-
can actions and attitudes.

II. BASIC FACTORS

THE KUOMINTANG PROGRAM

The ideological basis of the Kuomintang was formulated by Dr.
Sun Yat-sen during his years of conspiracy against the Manchu

38

A REVIEW OF KUOMINTANG-COMMUNIST RELATIONS 39

regime and was elaborated in various of his writings after the 1911
revolution. Dr. Sun tried to make use of Western thought while con-
structing a solution specifically for China which would retain what he
thought valuable in the Chinese tradition. His program has con-
tinued to form the theoretical basis of Kuomintang political thought.

Dr. Sun conceived of the Chinese revolution as taking place in three
distinct stages: (1) military unification, (2) “political tutelage” and
(3) constitutionalism. 1 The first stage was to be a period of military
dictatorship. As soon as order should be restored, the second stage was
to begin, during which the people were to be trained by the Kuomin-
tang in the exercise of their political rights. Finally, the third stage
of constitutional government was to be reached and the revolutionary
process completed.

The long-term program that Dr. Sun Yat-sen hoped to put into
effect in China was detailed in many of his writings, of which the Sm
Min Chu-I, the “Three Principles of the People,” is the best known.
Briefly, his “Three Principles,” are : (1) min ts’u, or “people’s national-
ism,” under which China would regain her national integrity and
cultural unity; (2) min chSuan, or “people’s democracy,” under which
the people would exercise the “four political powers” (suffrage, recall,
initiative and referendum), by which they control the government,
which in its turn exercises the “five governing powers” (legislative,
judicial, executive, “examination” and censorial) ; and (3) min sheng ,
or “people’s livelihood,” a form of socialism involving equalization
of land ownership, regulation of capital and avoidance of the class
struggle.

Although Dr. Sun was impressed by the Bolshevik success in 1917
and although he accepted the tactical aid and advice of the Third
International, he never subscribed to Communist ideas such as the
class struggle; indeed, he stressed repeatedly that the class struggle
could and should be avoided in China. Dr. Sun invited and accepted
the aid and collaboration of the U.S.S.R., the Third International and
the Chinese Communist Party only with the expressed understanding
that “the Communist order or even the Soviet System cannot actually
be introduced into China” 2 and that “in joining the Kuomintang,

1 Sun Yat-sen, “Outline [Fundamentals] of National Reconstruction” ( Chien
Kuo Ta Kang), given in Leonard Shih Lien-hsu, Sun Yat-sen: His Political and
Social Ideas (Los Angeles, 1933), and in Arthur N. Holcombe, The Chinese Revo-
lution (Cambridge, 1930).

* Joint statement by Sun Yat-sen and Adolph Joffe, representative of Soviet
Russia, in Shanghai, January 1923. See Chinese Ministry of Information, China
Handbook , 1937-1945 (official publication of the Ministry of Information of
the Kuomintang) (New York, The Macmillan Company, 1947), p. 66.

40

U. S. RELATIONS WITH CHINA

Communists of the Third International are to obey Kuomintang
discipline .” * 3

THE COMMUNIST PROGRAM

The Chinese Communist program for the Chinese revolution is based
on the Leninist theories of imperialism and revolution in semi-colonial
countries. Although the theories have undergone changes at the hands
of men like Mao Tse-tung, Chairman of the Central Committee of the
Chinese Communist Party, basically they correspond to the orthodox
concepts of Lenin and Stalin. Innovations introduced by Chinese
Communist theoreticians have concerned details of the revolutionary
time-table and not basic revolutionary principles. The long-term
objectives of Chinese Communism are the orthodox Marxian goals of
socialism and, ultimately, the classless, communist society.

In all countries the “bourgeois-democratic revolution” is considered
by the Leninist theory to be “progressive” within certain limits, and
even to be a prerequisite of eventual socialist revolution. The first
objective of revolution in a colonial or semi-colonial country, however,
is what the Communists call the liberation of the country from im-
perialism and feudalism. During this period even the development
of capitalism is “progressive” but as the “bourgeois-democratic revo-
lution” progresses, inherent class antagonisms will come to the fore
and the bourgeoisie will come to ally itself with imperialism and
feudalism against the working class. At this point, according to Lenin,
collaboration between the bourgeoisie and the working class must cease.
In a frequently quoted passage Lenin said :

“The Communist International should form temporary understand-
ings , even alliances , with the bourgeois democracy of the colonies and
the backward countries, but not merge with it, unconditionally pre-
serving the independence of the proletarian movement, even in its
most embryonic form . . . We, as Communists, must and will support
bourgeois emancipation movements in the colonial countries only in
those cases when these movements are really revolutionary, when their
representatives will not hinder us in educating and organizing the
peasantry and the large masses of the exploited in the revolutionary
spirit .” 4

The Chinese Communist advocacy of democracy during the early
stages of the Chinese revolution must be considered in terms of the

8 Statement by Li Ta-chao, one of the top-ranking Chinese Communists, itod.,

p. 66.

4 E. Burns, Handbook of Marxism (New York, 1935), p. 896. The concluding
sentence is used by Liu Shao-ch’i in his pronouncement “On Nationalism and
Internationalism,” broadcast by the Chinese Communist North Shensi radio, Nov.
9 and 10, 1948. Italics as given in Burns, op. cit.

A REVIEW OF KUOMINTANG-COMMTJNIST RELATIONS

41

theory of “New Democracy” as propounded by Mao Tse-tung accord-
ing to the Leninist formula. The Communist party, he wrote, has a
role to perform even during the “bourgeois-democratic” stage of the
Chinese revolution :

“The first stage of this revolution in colonial and semicolonial coun-
tries — though according to its social nature, it is fundamentally still a
bourgeois-democratic one, of which the objective requirements still
basically call for the clearance of the way to capitalistic development —
yet, despite this, this revolution is no longer the old, wholesale bour-
geois-led revolution for the building of capitalist society and a state
of the bourgeois-dictatorship type, but a new type of revolution, wholly
or partly led by the proletariat, the first stage of which aims at the
setting up of a new democratic society, a new state of the combined dic-
tatorship of all classes. The fundamental character of this revolu-
tion will never vary until the arrival of the stage of Socialist revolu-
tion, though during its progress, it may pass through several minor
stages in accordance with the possible changes in the attitude of
enemies and allies .” 5

The tactics to be followed by the Chinese Communist Party during
the early stages of the revolution are implicit in the Communist anal-
ysis of the nature of the “bourgeois-democratic revolution.” The
Communist Party will in theory ally itself with such parties, groups,
or classes as it considers “progressive,” in order to hasten the revolu-
tion against feudalism and imperialism. But the great fear of the
Communist Party is that it may lose the initiative and the leadership
in the revolution to nationalists, reformers, or social-democrats. Com-
munist tactics in China have steered a precarious course between the
danger of “right opportunism,” through which the initiative is lost,
and that of “left extremism,” which, according to Communist thinking,
prematurely attempts to turn the “bourgeois-democratic revolution”
into a socialist revolution and thus causes the Communists to lose
their influence in the “bourgeois” revolution before the socialist revolu-
tion can be successfully prosecuted.

FOUNDATION OF THE COMMUNIST PARTY, 1921

The first Communist groups in China were formed in Peking in 1919
and 1920 by Ch’en Tu-hsiu and various students, among whom was
Mao Tse-tung. In 1920 at Baku, the Comintern convened a “Congress
of Oriental Nations,” at which China was represented. In May 1921

5 Mao Tse-tung, “China’s New Democracy,” 1940, is included in the appendix to
The Strategy and Tactics of World Communism , Supplement III (H. Doc. 154,
part 3, 81st Cong., 1st sess.).

U. S. RELATIONS WITH CHINA

42

the foundation meeting of the Chinese Communist Party was convened
in Shanghai by Ch’en Tu-hsiu and Li Ta-chao. During the following
months the Chinese Communist Party was organized in various
provinces and cities in China. Other Chinese Communist Groups were
formed among Chinese students in France, Germany, Russia and
Japan. In 1923 the Third Congress of the Communist Party met in
Canton and, in accordance with a previous decision of the Comintern,
decided to enter the Kuomintang and create a “united front” against
the northern militarists.

REORGANIZATION OF THE KUOMINTANG, 1924

Meanwhile Dr. Sun Yat-sen, whose appeals for foreign aid had
gone unanswered except by Russia and whose attempts to unify China
through alliances with southern war-lords had ended in his being
forced to flee from Canton to Shanghai, was carrying on discussions
with Adolph Joffe, a representative of Russia. In January 1923
Dr. Sun and Joffe issued a joint statement setting forth the principles
under which Russia and the Communist International were to aid the
Chinese revolution during the ensuing years :

“Dr. Sun Yat-sen holds that the Communist order or even the
Soviet system cannot actually be introduced into China because there
do not exist here the conditions for the successful establishment of
either communism or sovietism. This view is entirely shared by Mr.
Joffe, who is further of the opinion that China’s paramount and most
pressing problem is to achieve national unification and attain full
national independence, and regarding this task, he has assured Dr.
Sun Yat-sen that China has the warmest sympathy of the Russian
people and can count on the support of Russia.” 8

In partial fulfillment of this pledge of aid to Dr. Sun Yat-sen,
Michael Borodin was sent to Canton in September 1923. Borodin
quickly became the principal Kuomintang adviser. Under his direc-
tion the Kuomintang was reorganized at the First National Party
Congress in January 1924 along the lines of the Russian Communist
Party with centralized control extending from headquarters into the
smallest subdivisions. The Kuomintang was now able to function
with disciplined efficiency for the first time in its history. At the same
Congress it was resolved that Communists who were willing to take
an oath of obedience to the Kuomintang authorities and who accepted
the principles of the Kuomintang should be admitted to the Party as
individuals. Li Ta-chao declared in this connection:

• China Handbook, 1937-1945, p. 66.

A REVIEW OF KUOMINTANG-COMMUNIST RELATIONS 43

“In joining the Kuomintang, communists of the Third Interna-
tional are to obey Kuomintang discipline and to participate in the na-
tional revolution. They have not the slightest intention of turning
the Kuomintang into a communist party. Those Communists who join
the Kuomintang do so as individuals and not on a party basis.” 7

The objectives of the Kuomintang-Communist collaboration were
declared to be the elimination of feudalism (i. e. at that time, the
regime of the northern militarists) and the unification of the country
so that China would be able to stand up against foreign Powers on a
basis of equality.

III. KUOMINTANG-COMMUNIST COLLABORA-
TION, 1924-1927

In collaboration with the Communists and the Comintern advisers,
the Kuomintang was able to accomplish a shift from the tactics of con-
spiracy it had previously employed to those of revolution. The Kuo-
mintang assumed the leadership over the new forces that had been un-
leashed by the spread of nationalism in China. Through the use of
propaganda among the peasant and working masses, the Kuomintang
was able to turn its military campaigns into popular uprisings. Its
army was put under the leadership of officers trained according to
Soviet methods at the newly established Whampoa Academy, and
achieved a degree of efficiency never before equaled in modern China.

Following the death of Dr. Sun Yat-sen in 1925, General Chiang
Kai-shek, director of the Whampoa Academy, became the leading
figure in the Kuomintang. In 1926 he commanded the “Northern Ex-
pedition,” a campaign to unify China by destroying the power of the
warlords in the north. The revolutionary forces, preceded by propa-
ganda corps, made rapid progress, and toward the end of the year the
Kuomintang capital was established at Hankow. A split in the party
between the left wing at Hankow and the right wing under the leader-
ship of General Chiang, however, was becoming increasingly evident.
The latter was anxious to obtain the support of the middle classes,
particularly the commercial and banking community of Shanghai,
while the Communists were attempting to turn the Nationalist revolu-
tion into social revolutionary channels. In April 1927 the Generalis-
simo set up a government at Nanking rivaling that of the left faction of
the Kuomintang which had gained dominance in Hankow. Follow-
ing the capture of Shanghai in March 1927 he carried out a purge of
the Communists in Shanghai, and somewhat later conducted a similar

1 IMd p. 66.

44

U. S. RELATIONS WITH CHINA

one in Canton. These purges involved several hundred thousand
deaths. It should also be remembered that leading figures on both
sides were still in comparable positions twenty years later, which
inevitably added great personal bitterness to the other factors which
complicated the later negotiations.

Meanwhile the position of Borodin and the Communists in Hankow
was becoming more difficult. Conflicting and ill-advised orders from
Moscow, which was at the time in the throes of the Stalin-Trotsky
controversy, did not help the position of the Communists. The crisis
was precipitated when the Kremlin forced the Chinese Communists
to demand majority control of the Kuomintang and separate workers
and peasant armies. Borodin knew better than to present such a
demand, but Roy, the Indian watchdog of the Third International,
went over his head. By July, the Communist cause had collapsed and
Borodin was forced to retire from China, while purges of the Com-
munist element in Hankow were being carried out.

IY. CIVIL WAR, 1927-1936

Although the Communists had been expelled from both wings of the
Party, unity within the Kuomintang was not restored until February
1928 when the Party was reorganized under the control of General
Chiang Kai-shek. In June 1928 Kuomintang forces took Peking,
completing the official unification of China and destroying the power
of the northern warlords. After 1927, the principal obstacle to sta-
bility in China was the existence of Chinese Communist districts and
troops in open rebellion against the National Government of China.

Once they had been purged from the cities and had lost their prole-
tarian base, the Communist leadership concentrated on a small area in
south Kiangisi which remained the remnant of a much larger South
China peasant base. Since the economy of this area was wholly agrar-
ian, Communist tactics shifted to exploitation of peasant difficulties.
This was the forerunner of later Communist expansion and successes.
It also represented the triumph of the Mao Tse-tung faction which
opposed the urban policy of Li Li-san and favored an agrarian em-
phasis. Li Li-san, who had gone to Moscow, was not to return to
prominence until the Russian army brought him to Manchuria in 1945.

In five major “bandit suppression campaigns,” starting in Decem-
ber 1930 and lasting until 1935, the Generalissimo attempted to ex-
terminate the Communist forces in China. These campaigns were
launched as follows: (1) December 1930, under Lu Ti-p’ing; (2) May
1931, under Ho Ying-ch’in; (3) June 1931, under Chiang Kai-shek;

A REVIEW OF KUOMINTANG-COMMUNIST RELATIONS 45

(4) April 1933, under Ch’en Ch’eng; (5) October 1933, under Chiang
Kai-shek.

The fourth and particularly the fifth campaigns were planned with
the assistance of the German military advisers Von Seeckt and after
him Von Falkenhausen. Hundreds of thousands of troops were mo-
bilized by the Nationalists. The campaigns did not succeed in exter-
minating the Communists, but the Generalissimo was able to dislodge
them from their bases in southern China, forcing them to flee to a
base in the northwest in the a long march” of 1934-1935. An incidental
effect of the anti-Communist campaigns was the consolidation of Na-
tionalist political control over many of the provinces that had pre-
viously maintained a degree of regional autonomy.

V. THE KUOMINTANG-COMMUNIST ENTENTE,

1937-1944

BACKGROUND OF THE ENTENTE

While the National Government was engaged in the problem of
suppressing Communism, Japan embarked upon a series of encroach-
ments on Chinese territory, beginning with occupation of Manchuria
in 1931 and leading up to the Marco Polo Bridge incident on July
7, 1937.

The Japanese actions aroused large sectors of Chinese opinion. The
effect of this aggression was similar in many ways to the effect of the
earlier Twenty-one Demands and the insistence by Japan at the Paris
Peace Conference that it be ceded the German rights in the Shantung
peninsula. Again there was an upsurge of nationalism, particularly
after 1935, when the loss of the northern provinces was threatened.
The revival of patriotism included most of politically conscious
China — elements ranging from warlords to students. Resistance
against Japanese aggression became a popular slogan exploited not
only by leftist intellectuals, such as those united in the National Salva-
tion League, but also by dissident militarists.

The Chinese Communists had declared “war” on Japan as early as
1932 while their main force was still concentrated in Kiangsi, hundreds
of miles from the nearest Japanese troops. 8 Although demands for
a “united front” became a factor in the Communist propaganda, the
Chinese Communist Party at first offered no concessions to other
groups to make possible a true “united front” but insisted on retaining

8 See the “Circular Telegram of the Provisional Central Government of the
Soviet Republic of China Declaring War Against Japan/’ given in V. A. Yakhontoff,
The Chinese Soviets (New York, 1934), pp. 236-38.

46

U. S. RELATIONS WITH CHINA

full control over any anti-Japanese coalition. In 1935 the Seventh
World Congress of the Comintern officially proclaimed the new policy
of the “united front” and offered the cooperation of Communist parties
to other groups willing to fight fascism. At that time, the Chinese
Communist Party was criticized because it had “not yet succeeded in
carrying out these tactics [of the united front] really consistently
and without mistakes,” and because the concept of the “united front”
had not been broad enough. The Chinese Communist Party was spe-
cifically censured for failing to unite with the dissident anti- Japanese
militarists who had rebelled against the Nanking government in
Fukien Province in 1933. 10 Following the Congress, the first serious
offers of a “united front” were made to the Kuomintang. In January
1936 s the Chinese Communist Party publicly offered the “hand of
friendship” to Generalissimo Chiang Kai-shek if he would take up
arms against Japan. On August 26, 1936, the Chinese Communist
Party proclaimed to the Kuomintang, “we are prepared to form a
strong revolutionary united front with you as was the case during . . .
the great Chinese Revolution of 1925-1927 . . . [that] is the only
proper way to save our country today.”

Coming at a time of growing patriotic resentment against Japanese
aggression, the stepped-up demands for a “united front” by the Chinese
Communist Party were an effective propaganda weapon for use against
the troops to which the National Government had assigned the task
of “bandit suppression” in northwest China. By the end of 1936 the
army of Chang Hsueh-liang, the former warlord of Manchuria, was
in no mood to fight against the Communist forces. In December 1936
the Generalissimo and his staff visited Sian in Shensi Province to map
out a sixth “Bandit Suppression” campaign. Rather than carry out
Nationalist orders to resume operations against the Communists,
Chang Hsueh-liang decided to “arrest” the Generalissimo. In this
move he was acting in league with the commander of the “Hsipei”
(Northwestern) troops, Yang Hu-ch’eng, and the subordinate com-
manders of both the Hsipei army and his own “Tungpei” (Manchur-
ian) army.

On the day of the coup the commanders of the “Tungpei” and
“Hsipei” armies issued a circular telegram stating the demands of
“national salvation,” consisting of eight points : reorganization of the
Nanking government and admission of parties to share the joint re-
sponsibility of national salvation; end of the civil war and armed
resistance against Japan ; a release of the leaders of the patriotic move-

10 Wang Ming, The Revolutionary Movement in the Colonial Countries, Report
to the VII World Congress of the Communist International , August 7, 1935 (New
York, 1935).

A REVIEW OF KUOMINTANG-COMMUNIST RELATIONS 47

ment in Shanghai; pardon of all political prisoners; a guarantee of
liberty of assembly; safeguard for the people’s rights of patriotic
organization and political liberty ; putting into effect the will of Dr.
Sun Yat-sen; and convening a National Salvation Conference. 11

These points corresponded generally to a program of “national
salvation” advocated by the Communist Party in a telegram issued
earlier in December. They also resembled a manifesto issued by the
“All-China Federation of National Salvation” on May 31, 1936.

The details of the Sian incident have been obscured by the personal
considerations involved in the available accounts. According to one
version, Chang Hsueh-liang and some of his associates considered the
Generalissimo their leader and merely wished to awaken him to the
danger of Japanese aggression, although other more radical officers
of the “Tungpei” army favored executing him. The Chinese Com-
munist Party, whose representatives were called to Sian immediately
after his capture, at first favored the execution of the Generalissimo,
but, apparently on orders from Moscow, shifted to a policy of saving
his life. The Chinese Communist concept, inspired from Moscow,
became one of promoting a “united front” with the Generalissimo and
the National Government against the Japanese; this concept seems to
have played a considerable role in saving the life of the Generalissimo.
At any rate, on December 25, 1936, the Generalissimo returned to Nan-
king, accompanied by his captor Chang Hsueh-liang, who expressed
sentiments of repentance. It seems certain that no agreement between
the Generalissimo and the Communist or Tungpei leaders was signed.
It seems equally certain, however, that an understanding of some kind
was reached by the groups involved. After the Sian incident the
establishment of an entente between the Chinese Communists and the
Kuomintang moved rapidly ahead. 12

The wartime entente between the Kuomintang and the Chinese
Communist Party was never formalized .by a written alliance, but
rested upon a series of parallel documents issued by the two parties, by
which the Kuomintang announced the change in Chinese Government
policy from one of military suppression of communism to that of
seeking a political settlement, and by which the Chinese Communist
Party proclaimed the abandonment of forceful insurrection and sovi-
etization in favor of cooperation with the Government against Jap-
anese aggression. These documents are (1) the telegram from the

11 See annex 34.

“A first-hand account of the Sian incident is given in Mme. Mei-ling (Soong)
Chiang, China at the Crossroads ; an Account of the Fortnight in Sian , when the
Fate of China Hung in the Balance (London, Faber and Faber, 1937) . This work
was also published with varying titles in New York and Shanghai.

48

U. S. RELATIONS WITH CHINA

Central Committee of the Chinese Communist Party to the Third
Plenary Session of the Kuomintang Central Executive Committee on
February 10, 1937 ; (2) the resolution of February 21, 1937 of the Third
Plenary Session of the Kuomintang Central Executive Committee;
(3) the manifesto of September 22, 1937 by the Central Committee
of the Communist Party; and (4) the statement on the following day
by Generalissimo Chiang Kai-shek commenting on the Communist
manifesto.

THIRD PLENARY SESSION OF THE KUOMINTANG CENTRAL
EXECUTIVE COMMITTEE, 1937

Shortly after the return of the Generalissimo from Sian, the Third
Plenary Session of the Fifth Central Executive Committee of the
Kuomintang was held in Nanking. On February 10, 1937, five days
before the session opened, the Central Committee of the Chinese Com-
munist Party addressed a telegram to the session which recommended
a program including the suspension of civil war and the concentration
of the national strength against external aggression, a guarantee of
civil rights, the calling of a “national salvation” conference, the prep-
aration for armed resistance and improvement in living conditions
of the people. If these points were approved, the Communist Party
declared itself prepared to make certain alterations in the policies
that had characterized its activities :

1. to stop the program of armed uprisings throughout the country
for the overthrow of the National Government in Nanking;

2. to change the Chinese Soviet Government into the Government of
the Special Region of the Republic of China and the Red Army into the
National Revolutionary Army under the direct leadership of the
Military Affairs Commission in Nanking;

3. to enforce the democratic system of universal suffrage within
the special regions under the regime of the Government of the Special
Regions ;

4. to put an end to the policy of expropriating the land of the
landlords and to execute the common program of the anti- Japanese
united front. 13

The question of reconciliation with the Communists was dealt with
at length by the Third Plenary Session in a resolution passed on
February 21, 1937. The resolution reviewed the original leniency of
Sun Yat-sen in admitting Communists to the Kuomintang in 1924

13 Text in New China (Yenan, Mar. 15, 1937). See annex 35.

A REVIEW OF KUOMINTANG-COMMUNIST RELATIONS 49

and their “subsequent treasonable and rebellious activities” up to the
time of the session, when the “Communist bandits, reduced to straits
in the Northwest, have begun to announce alleged willingness to sur-
render.” The resolution stated that the Kuomintang would give the
Communists a chance to “reform” on four conditions :

1. Abolition of the separate army and its incorporation into the
united command of the nation’s armed forces.

2. Dissolution of the so-called “Chinese Soviet Republic” and simi-
lar organizations and unification of the government power in the
hands of the National Government.

3. Absolute cessation of Communist propaganda and acceptance of
the Three People’s Principles.

4. Stoppage of the class struggle. 14

These points corresponded closely to the changes in policy the
Communist Party had declared itself willing to make. After having
laid down the conditions on which the Communists would be per-
mitted to “start life anew”, the session in its closing manifesto blamed
the Communists for terroristic activities since 1927, “thus undermining
the nation’s strength which otherwise would have been employed in
resisting the invader.” The cardinal policy of the Kuomintang was
declared to be the eradication of the Communist scourge. However,
the achievement of unity through peaceful means was to be the guiding
principle, although the Chinese people were warned against the
fallacious theories of the class struggle. 15

These documents established the basic conditions for the entente.
During the ensuing months negotiations betwen the parties continued.
Chou En-lai held discussions with the Generalissimo and other
Kuomintang officials at Ruling, summer capital of China. Other
meetings were held within Chinese Communist territory.

Many of the conditions of the entente were implemented during the
course of the negotiations. The civil war ceased. The Com-
munist policies of land confiscation were suspended, and Communist
propaganda was preparing the people for the united front. The
Kuomintang was making active preparations for increased democra-
tization, including the calling of a People’s National Congress for
November 1937 to inaugurate a new constitution. 16 Many, though
by no means all, of the political prisoners held by the Kuomintang
were released.

14 The China Year Book , 1988 , pp. 532, 470; China Handbook, 1987-1945, p. 66.

15 China Handbook, 1987-1945, p. 66.

- 18 Because of the war and repeated postponements this Congress did not meet
until November 1946.

50

XT. S. RELATIONS WITH CHINA

MANIFESTO OF THE CHINESE COMMUNIST PARTY, SEPTEMBER
22, 1937

Apparently public announcement of the entente was originally
scheduled for the middle of July 1937, when a Chinese Communist
manifesto was handed to the Kuomintang, declaring that Chinese
unity had been restored for the purpose of resisting Japan. Publica-
tion of the manifesto was delayed until September 22, 1937, because of
the outbreak of hostilities with Japan after the Marco Polo Bridge
incident of July 7, 1937.

The manifesto of the Central Committee of the Communist Party,
published on September 22, 1937, stated that the Communist Party had
“on the basis of peace and national unity and joint resistance against
foreign aggression, reached an understanding with the Kuomintang”
and proposed the following objectives:

“(1) Struggle for the independence, liberty and emancipation of
the Chinese nation by promptly and swiftly preparing and launching
the national revolutionary campaign of resistance. . . .

“(2) Enforce democracy based on the people’s rights and convoke
the National People’s Congress in order to enact the Constitution and
decide upon the plans of national salvation.

“(3) Improve the well-being and enrich the livelihood of the
Chinese people. . .

The manifesto expressed the belief that the whole country would
support these objectives, although the program would meet with
numerous difficulties, particularly from Japanese imperialism, and
declared :

“(1) The San Min Chu-I enunciated by Dr. Sun Yat-sen is the
paramount need of China today. This Party is ready to strive for
its enforcement.

“(2) This Party abandons its policy of overthrowing the Kuomin-
tang of China by force and the movement of sovietization, and dis-
continues its policy of forcible confiscation of land from landowners.

“(3) This Party abolishes the present Soviet Government and will
enforce democracy based on the people’s rights in order to unify the
national political machinery.

“(4) This Party abolishes the Red Army, reorganizes it into the
National Revolutionary Army, places it under the direct control of
the National Government, and awaits orders for mobilization to share
the responsibility of resisting foreign invasion at the front.” 17

1T Full text given in annex 36.

A REVIEW OF KUOMINTANG-COMMUNIST RELATIONS 51

STATEMENT BY GENERALISSIMO CHIANG KAI-SHEK,
SEPTEMBER 23, 1937

On September 23, 1937, the day following the publication of the
Communist manifesto, the Generalissimo issued a formal statement
welcoming the change in Communist policies :

“The Manifesto recently issued by the Chinese Communist Party
is an outstanding instance of the triumph of national sentiment over
every other consideration. The various decisions embodied in the
Manifesto, such as the abandonment of a policy of violence, the cessa-
tion of Communist propaganda, the abolition of the Chinese Soviet
Government and the disbandment of the Red Army are all essential
conditions for mobilizing our national strength in order that we
meet the menace from without and guarantee our own national
existence.

“These decisions agree with the spirit of the Manifesto and resolu-
tions adopted by the Third Plenary Session of the Kuomintang. The
Communist Party’s Manifesto declares that the Chinese Communists
are willing to strive to carry out the Three Principles. This is ample
proof that China today has only one objective in its war efforts.” 18

IMPLEMENTATION OF THE AGREEMENTS, 1937-1938

During 1937 and 1938 a number of concrete steps were taken to
implement the entente and to further the united resistance against
the Japanese invasion. By order of the National Government the
Chinese Communist Army was reorganized as the Eighth Route Army,
and later into the 18th Group Army, with the Communist generals Chu
Teh and P’eng Te-huai as commander and vice-commander, and Lin
Piao, Ho Lung, and Liu Po-ch’eng as division commanders. The
Eighth Route Army was designated to garrison the area of the Shensi-
Kansu-Ninghsia (Shen-Kan-Ning) border region, the former Com-
munist area. Shortly afterwards the Communists, whose area of con-
trol was expanding as a result of their guerrilla warfare efforts,
established the Shansi-Chahar-Hopei (Chin-Cha-Chi) border region
government under the National Government. The Chin-Cha-Chi
regional government received the sanction of the National Government
in J anuary, 1938 ; it was the only Communist-dominated local govern-
ment to receive such formal sanction. During the first three years of
the entente the Communist armies received a monetary subsidy from
the National Government, as well as a small allotment of ammunition.

In addition the National Government carried out a number of
measures regarding civil rights and greater democratization, although

“ Full text in annex 37.

52

U. S. RELATIONS WITH CHINA

due to wartime conditions it did not call the National Assembly into
session to act on a new Chinese constitution. The Communist Party
was permitted to publish its own newspaper, the Hsin Hua Jih-Pao
(New China Daily ) in Hankow. 18a Chou En-lai was one of the seven-
teen members of the presidium of the Extraordinary National Congress
of the Kuomintang in March 1938 and was appointed Vice-Minister
of the Political Training Board of the National Military Council, a
position he held until 1940.

Among the more important steps towards increased democracy aAd
freedom of discussion taken by the Kuomintang during this period was
the creation by the Extraordinary National Congress of the Kuomin-
tang in March 1938 of the People’s Political Council (PPC), with
powers to discuss and question all important Government measures and
to make proposals to the Government. Although the People’s Political
Council was purely advisory, the prestige of its members and the
caliber of its discussions made it a significant body.

The most important policies of this period are embodied in the
“Program of Armed Resistance and National Reconstruction,” which
was adopted by the Kuomintang Party Congress on April 1, 1938, and
subsequently by the People’s Political Council. The “Program” was
accepted by both the Kuomintang and the Chinese Communist Party
as the basic outline of principles to be followed by the wartime entente,
subsidiary only to the San Min Chu-I (Three People’s Principles). 19
The Program pledged China to play a just role in world affairs, urged
intensified military activity, called for governmental reforms, in-
creased economic growth and the organization of the people.

The period during which the National Government was located at
Hankow marked the high point of Kuomintang-Communist coopera-
tion. In spite of continued defeats of the Chinese armies by Japan,
the solidarity of the Chinese people created a spirit of optimism. The
Generalissimo emerged as the symbol of national unity and of eventual
victory.

DETERIORATION OF KUOMINTANG-COMMUNIST RELATIONS,
1938-1941

In the latter half of 1938 relations between the Kuomintang and the
Chinese Communist Party began to deteriorate. At the end of August
the Hankow- Wuchang Defense Headquarters outlawed three Com-
munist-sponsored mass organizations because it feared the Com-
munists would use them to gain influence in Nationalist territory.

188 This Communist paper continued to be published in Nationalist territory
throughout the war.

19 Text is given in China Handbook, 1987-1945, pp. 61-62.

A REVIEW OF KUOMINTANG-COMMUNIST RELATIONS 53

After the fall of Hankow in October 1938 Communist-Kuomintang
relations worsened steadily. More Communist organizations were
suppressed. The Communists were attacked for failing to yield con-
trol over their area in Shensi Province to the National Government,
and for not allowing the National Government to exercise direct com-
mand over the Communist armies in the field and to direct their
training.

In the following years relations between the two parties remained
strained, and charges and countercharges of failure to abide by the
promises of 1937 became increasingly violent, often leading to local
clashes between Chinese National and Communist forces. The one
policy common to both parties was resistance against the Japanese
invasion, and even this was often neglected amid the jockeying for
advantage between the two parties. However the resumption of open
hostilities on a large scale was avoided. During 1939 the National
Government, at that time located in Chungking, began to enforce a
rigid military blockade of the Communist areas to prevent Communist
infiltration into Nationalist China. The expansion of Communist
military forces into areas outside the regional defense zones assigned
them by the National Government led to incidents and continuous
skirmishes between the Communists and Nationalists. The arguments
and fighting over the demarcation between Communist and Nationalist
military zones culminated in the “New Fourth Army Incident” of
January 1941, the most serious wartime clash between Nationalist
and Communist armies and the real beginning of civil strife. The
fighting reached such proportions that it received world-wide atten-
tion. The Government version of the incident was that it had issued
orders for the Communist New Fourth Army to move north of the
Yangtze and engage the Japanese in the Yellow River area, but the
orders had been ignored because the Communists wished to expand
their holdings in the south. For reasons of discipline it was therefore
necessary to disarm them. It was the Communist contention that the
Government purpose was to restrict Communist areas and at the same
time place the New Fourth Army in a hopeless military position.

KUOMINTANG-COMMUNIST NEGOTIATIONS, 1941-1944

In spite of the frequent military friction between the Communist
and Nationalist forces, the Government policy remained that of seek-
ing a political settlement with the Communists. On March 6, 1941,
in a reference to the “New Fourth Army Incident” in a speech to the
People’s Political Council, the chief arena in which attempts were
made to settle the issue between the Communists and Kuomintang, the
Generalissimo said:

54

U. S. RELATIONS WITH CHINA

. . the Government is solely concerned with leading the nation
against the Japanese invaders and extirpating the traitors, and is
utterly without any notion of again taking up arms to ‘suppress the
Communists.’ . . . Provided unity can be preserved and resistance
carried on to the end, the Government will be ready to follow your
direction [i. e., the directions of the PPC] in the settlement of all
outstanding questions.” 20

No settlement was reached between the Kuomintang and the Chinese
Communist Party, however, and the relations between the two armies
continued strained, with periodic fighting, while at the meetings of
the People’s Political Council a group of minor parties continued at-
tempts at mediation. These minor parties had formed the “United
National Construction League” 21 at the end of 1939, with the principal
object of preserving Kuomintang-Communist cooperation. Minor
parties played an important, if unsuccessful, role in the negotiations
between the Communists and the Kuomintang prior to the offer of
American good offices in 1944 by Major General Patrick J. Hurley,
the Personal Representative of President Roosevelt.

Attempts to settle the Kuomintang-Communist differences were not
limited to discussions and statements before the PPC. On a number
of occasions direct negotiations between Communist and Nationalist
officials took place. The first of these occasions was the talks between
General Ho Ying-ch’in, Minister of War in the National Government,
and Chin Pang-hsien (Po Ku), a member of the Chinese Communist
Party’s Central Committee, early in 1940.

In September 1943 the Generalissimo gave explicit instructions to
the Eleventh Plenary Session of the Fifth Central Executive Commit-
tee of the Kuomintang that the Chinese Communist problem should be
handled by peaceful means :

“After hearing the Secretariat’s report on the question of the Chi-
nese Communist Party and the views expressed by various members
of the Central Executive Committee, I am of the opinion that first of
all we should clearly recognize that the Communist problem is a purely
political problem and should be solved by political means. Such
ought to be the guiding principle for the Plenary Session in its effort
to settle this matter.” 22

Following the Eleventh Plenary Session, Communist General Lin
Piao conducted negotiations in Chungking during November 1943 on
the reorganization of the Communist forces.

20 This speech is given in full in annex 38.

21 This League went through several reorganizations and finally became known
as the Democratic League.

22 The full text is given in annex 39.

A REVIEW OF KUOMINTANG-COMMUNIST RELATIONS 55

More comprehensive discussions between representatives of the
Chinese Government and the Chinese Communist Party began in Sian
on May 4, 1944. The Government was represented at these talks by
General Chang Chih-chung of the National Military Council and Dr.
Wang Shih-chieh, then Minister of Information. The Communists
were represented by Lin Tzu-han, an important member of the Central
Committee of the Chinese Communist Party. Chang, Wang and Lin
returned to Chungking on May 14, 1944, and continued the negotia-
tions through an exchange of memoranda until September, when the
negotiations were discussed in detailed reports to the PPC by Chang
Chih-chung and Lin Tzu-han.

During these discussions the following major points were brought
up:

1. The disposition, size, command, and training of the Communist
armies.

2. The relationship between Communist-organized regional govern-
ments and the National Government.

3. Problems connected with civil rights and especially the legaliza-
tion of the Communist Party and its activities in Nationalist areas.

Incidental to these points a number of problems arose which were
connected with the implementation of various pledges made by the
Communist Party and the Kuomintang throughout the period of
Kuomintang-Communist entente. During these discussions the ques-
tion of constitutional government arose, and suggestions for “coalition
government” were brought forth for the first time.

Although no settlement was reached on the basis of these discussions,
it is clear that from May to September 1944 the Chinese Government
and the Chinese Communist Party were seeking a peaceful settlement
of their disputes through political negotiations. 23

THE WALLACE MISSION, 1944

During the spring of 1944, President Roosevelt appointed Vice
President Henry A. Wallace to make a trip to China to see what he
could do toward consolidating the Chinese war effort against J apan.
Mr. Wallace took this opportunity to visit Soviet Central Asia for a
brief inspection of agricultural developments, and arrived in Chung-
king the latter part of June. In the course of this visit Mr. Wallace
had several long conversations with the Generalissimo on matters of
mutual interest. The notes made on these conversations indicate that

23 See annexes 40, 41, and 42.

U. S. RELATIONS WITH CHINA

56

a wide range of topics was discussed of which the majority have no
bearing on the events and issues described in this present paper. 24

In a conversation on June 21 with the Generalissimo, Mr. Wallace
stated that the President had indicated to him that if the Kuomintang
and the Communists could not get together they might “call in a
friend”. The President had indicated that he might be that friend.
John Carter Vincent, in a conversation the next morning, said that
Stalin had agreed with Ambassador Harriman in Moscow that support
of the Generalissimo was desirable during the prosecution of the war
and expressed keen interest in a settlement between the Kuomintang
and the Communists, basing his interest on the practical matter of more
effective fighting against Japan rather than upon any ideological
considerations, and adding that he felt the United States should assume
a position of leadership in the Far East.

During a conversation on the afternoon of June 22, the General-
issimo launched into a lengthy complaint against the Communists,
whose actions, he said, had had an unfavorable effect on Chinese
morale. He added that the Chinese people regarded them more as
internationalists than as Chinese, despite the nominal dissolution of
the Third International. He then added that the Communists desired
the breakdown of Chinese resistance against J apan because this would
strengthen their own position. They did not fear such a development
because they were now convinced that Japan would be defeated
without Chinese resistance. The Generalissimo deplored propaganda
to the effect that they were nothing more than agrarian democrats
and remarked that they were more communistic than the Russians.
He said that a settlement with the Communists would be simple if
they would agree to support the Government and accept a peaceful
and political role in the administration of the country. He urged
that the United States maintain an attitude of “aloofness” toward
the Communists which would encourage them to show a greater
willingness to reach a settlement with Kuomintang. The Foreign
Minister, who was present at the conversation, interposed at this stage
to say that whereas the Government required the Communists to sub-
mit to its authority, it was not its intention to interfere in local ad-
ministration or remove officials or army officers who showed themselves
to be cooperative. In conclusion, the Generalissimo said that he
understood the policy of President Roosevelt and requested that the

24 See annexes 43 and 44, for summary notes of these conversations made by
John Carter Vincent, then Chief of the Division of Chinese Affairs of the Depart-
ment of State, who accompanied the Vice President to China. The Department
is not aware of any written record which Mr. Wallace himself may have made.

A REVIEW OF KUOMINTAN G-COMMUNIST RELATIONS 57

President be informed that he, the Generalissimo, desired a political
solution of the Communist problem.

It was in a conversation on the following morning, June 23, that
the Generalissimo suddenly reversed his previous refusal to permit
Americans in Communist territory and agreed that an American
military observer mission could proceed. 25 Later in the conversation
the question of Russia again rose. Mr. Wallace stressed the point that
no situation should be permitted in China which might lead to conflict
with Russia. The Generalissimo agreed and added that anything
not detrimental to Chinese sovereignty would be done to avoid such
a conflict. Mr. Wallace again said that the United States could not
be expected to be a party to any negotiations. The Generalissimo ex-
pressed his concurrence and said that China would seek an early
opportunity for discussions with Russia. In another conversation
later in the day, the Generalissimo asked that the following message
be conveyed to the President : “If the United States can bring about
better relations between the U. S. S. R. and China, and can bring about
a meeting between Chinese and Soviet representatives, President
Chiang would very much welcome such friendly assistance.” 26

During the ride to the airport on June 24, the Generalissimo twice
expressed his appreciation that Mr. Wallace, as a representative of
President Roosevelt, should lend his efforts for the improvement of
Sino-Soviet relations. The Generalissimo also said he would wel-
come the assistance of the President in the settlement of the Com-
munist problem, even though it was an internal one. He also
expressed his conviction that the Communists were not men of good
faith, but that if the President were willing to take the risk of helping
he would be happy to have such assistance and would not consider it
as meddling in internal affairs.

CONCLUSION

In September 1944 the negotiations went into a new phase with the
arrival of General Hurley as the Personal Representative of the Presi-
dent of the United States with the mission of promoting harmonious
relations between Generalissimo Chiang and General Stilwell, and of
performing certain other duties in connection with military supplies.
It was only a few months later after the termination of the original

25 Unsuccessful attempts had been made previously by the United States Army to
secure Chinese permission for an observer group to go to Communist territory.
On June 22 Mr. Wallace mentioned the subject and received an evasive answer
from the Generalissimo.

26 These views should be considered in connection with chapter IV.

58

U. S. RELATIONS WITH CHINA

mission that the Kuomintang-Communist struggle, with the entrance
of the United States on the scene, due to the need for prosecuting the
war against Japan, took on an international aspect, which it had not
possessed since the expulsion of the Russian Mission in 1927. The
intervening seventeen years of bitter civil war and subsequent reluctant
cooperation, under external threat, had created deep-seated hatreds,
suspicions, differences of approach and objective, and a reluctance to
forget the past which, more severely than was perhaps realized at the
time, limited what could usefully be contributed by outside assistance.

CHAPTER III

The Ambassadorship of Major General
Patrick J. Hurley, 1944—1945

I. IMMEDIATE BACKGROUND OF THE HURLEY

MISSION

INTRODUCTION

Major General Patrick J. Hurley was appointed Personal Repre-
sentative of the President to China on August 18, 1944. He arrived
in Chungking on September 6, 1944. Mr. Clarence E. Gauss resigned
as Ambassador to China on November 1, 1944, and General Hurley was
nominated for the position on November 30, 1944. He presented his
credentials on J anuary 8, 1945.

To understand the reasons for the mission of General Hurley to
China it is necessary to take into account the conditions which existed
internally in China in 1943 and 1944. As indicated above, the Chinese
record of opposition to Japanese aggression had been a distinguished
and enviable one which commanded the admiration and sympathy of
all peoples throughout the world who were opposing aggression. By
1943, however, the devitalizing effects of six years of war were begin-
ning to make themselves felt. This trend in 1944 became pronounced
to an alarming degree.

The long years of war were taking a heavy economic toll. Many
of the most productive areas of China had been occupied by Japan.
Inflation began to set in and the new Chinese middle class which had
been the backbone of Kuomintang liberalism found itself being pro-
gressively beggarized. In this situation the extreme right wing and
reactionary elements in the Kuomintang came to exercise increasing
power and authority. The regular and periodic political reports of
the Embassy in Chungking indicated a steady deterioration in the
economic situation and a growing paralysis within the governmental
administrative hierarchy. It was symptomatic that the Embassy
reported that the Twelfth Plenary Session of the Fifth Kuomintang

59

60

U. S. RELATIONS WITH CHINA

Central Executive Committee had met in May 1944 but apparently
accomplished little and had resulted in a serious setback for liberal
elements in the Party. The Embassy also reported that liberal
elements in the Party were discouraged by the trend but hoped that
developments would support their contention that Kuomintang leader-
ship was bankrupt.

The protracted background of developments outlined in chapter
II contributed to the particular state of relations between the
Chinese Communists and the National Government which existed
when General Hurley embarked on his mission. As has already been
pointed out, following the Sian incident in late 1936 the Chinese Na-
tional Government and the Chinese Communist Party had indicated
their intention to present a united front against the Japanese invaders
and to settle their differences by political means. Negotiations be-
tween the Communists and the National Government had been pro-
ceeding over a period of seven years prior to General Hurley’s mission
to China. In his instructions to the Eleventh Plenary Session of the
Fifth Central Executive Committee of the Kuomintang held in Sep-
tember 1943, the Generalissimo had stated that he was of the opinion
that “first of all we should clearly recognize that the Chinese Com-
munist problem is a purely political problem and should be solved by
political means”, 1 that is, through negotiations rather than through
force. Accordingly, in the spring of 1944, active negotiations had been
conducted at Sian by the National Government represented by Dr.
Wang Shih-chieh and the Chinese Communist Party represented by
Lin Tsu-han.

Despite the announced intention of the Chinese Government and
the Chinese Communist Party to seek a political, that is a negotiated,
solution of their differences, and notwithstanding the fact that negotia-
tions were being actively conducted to that end, the Chinese military
effort against Japan was increasingly handicapped by internal dis-
unity.

In a conversation on July 3 with an officer of the Embassy, Dr.
Sun Fo, President of the Legislative Yuan, said he had discussed the
situation frankly with the Generalissimo. He had told him that the
Chinese armies must be rehabilitated if they were to be effective. He
also pointed out that one of the principal obstacles to effective prose-
cution of the war was the immobilization of some 300,000 of the
Government’s best troops to watch the Chinese Communists. This
factor, he said, also immobilized large Chinese Communist forces
which had fought well against Japan and could do so again. Dr. Sun
said he had told the Generalissimo that the Chinese Communists did

1 China Handbook, 1987-1945 , P. 67.

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 61

not want to communize or dominate China, that it would in any case
be impossible for them to do so and that what they wanted was a
settlement which would enable them to cooperate with the Nationalist
Government against Japan. Dr. Sun added to the Embassy officer
that the Generalissimo was used to making decisions himself and not
taking advice. Dr. Sun felt, however, that his remarks had had some
effect and that the Generalissimo was actually seeking in his own
mind for means of reorienting some of his ideas. Dr. Sun felt that
American opinion could be of assistance in this process if it did not
appear to be bringing pressure on the Generalissimo.

However discouraged other elements may have been by the internal
deterioration and stalemate in the Chinese war effort against Japan,
no such note appeared in the words or actions of the General-
issimo. In his Double Tenth speech of October 10, 1944, he reiterated
his determination to fight to the end and to preserve his leadership in
the struggle for the consolidation of China. He also showed himself
sensitive to foreign criticisms of internal developments and in a rather
ominous note implied that foreign powers would be well advised not to
interfere in the internal affairs of China, particularly in the relations
of the National Government with the Chinese Communists.

The foregoing considerations were repeatedly reflected in the reports
made in 1944 by the American Ambassador, Mr. Gauss. As he often
emphasized, these factors were having a disastrous effect upon the
Chinese effort in the war against Japan. His comments and obser-
vations were substantiated by periodic reports he received from Ameri-
can consular officials in such widely diversified areas as Fukien,
Kweilin, Kunming, Chengtu, Sian and Lanchow.

Other American observers in China were becoming increasingly
apprehensive over the fact that neither the Chinese Government nor
the Chinese Communists were directing their main efforts against
Japan. Congressman Mansfield in January of 1945 in his report to
Congress following his return from his mission to China summarized
this opinion: “On the basis of information which I have been able
to gather, it appears to me that both the Communists and the
Kuomintang are more interested in preserving their respective Parties
at this time and have been for the past two years than they are in
carrying on the war against Japan. Each Party is more interested
in it own status because both feel that America will guarantee victory.”

CHINESE UNITY AND THE WAR EFFORT

Ambassador Gauss had emphasized this point of view in a conver-
sation with the Generalissimo on August 30, 1944. 2 He reported that

* See annex 45.

U. S. RELATIONS WITH CHINA

62

the Generalissimo had sent for him and had discussed the Chinese
Communist problem for an hour and a half, saying that Washington
did not understand the problem and it was the duty of the Ambassador
to see that it did. In addition to making charges of bad faith and
treachery against the Chinese Communists, General Chiang stated that
the attitude of the American Government in urging China to resolve its
differences with the Chinese Communists served only to strengthen the
latter in their recalcitrance. He said that the Communist demands
were equivalent to asking the Government to surrender unconditionally
to a party known to be under the influence of a foreign power. He
added that the United States should tell the Communists to settle their
differences with and submit to the N ational Government. Ambassador
Gauss stated that, being assured that he might speak frankly and
openly, he was able to emphasize that the American Government was
not interested in the cause of the Chinese Communists but that it was
interested in seeing a solution of a Chinese internal problem which
found Chinese armed forces facing each other rather than facing and
fighting the Japanese and that this was of outstanding importance
in that critical period of the war- He expressed his complete sym-
pathy with the difficult task facing the Generalissimo in the solution
of the Chinese Communist problem and added :

“We have not suggested that the Chinese Government should capit-
ulate to Communist demands. Our interest is solely in the unification
of China and the dissipation of the present critical situation. Our
hope is that a peaceful solution can be found to this problem by the
Chinese themselves.”

The Ambassador reported that he made the personal observation
that while the Generalissimo said that the Chinese Communists were
not to be trusted, the Embassy had long heard the Chinese Com-
munists complain equally that the Kuomintang Government could not
be trusted. It seemed to him that an effort should be made to dissi-
pate this mutual mistrust and that it was his personal opinion that a
solution might be found in some measure which would bring the most
competent representatives of the several groups and parties to partici-
pate in and share the responsibilities of the Government. He was of
course aware of the Kuomintang contention that there could at that
time be one-party government only. He indicated, however, that he
would like to see the difficulty overcome. Even if it could not be over-
come on a broad basis to give representation in the Government to
minor parties, perhaps a limited solution might be found under which
able representatives of the parties or special groups might be provided
for, with these persons being invited to share in some form of responsi-
ble war council which planned and carried out plans to meet the serious

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 63

war crisis taking place in China. In conclusion the Ambassador said
that in such sharing of responsibility perhaps there could be developed
a disposition toward cooperation for unification of China. The Gen-
eralissimo commented that this suggestion might at least be worth
studying.

In response to the Ambassador’s report of this conversation, Secre-
tary of State Hull informed Mr. Gauss that the President and he had
given careful consideration to the report and agreed that a “positive,
frank, and free approach to Chiang on the subject of governmental
and related military conditions in China should be made at this time.”
The Secretary indicated that the Generalissimo’s suggestion that the
Chinese Communists should be told to settle their differences with the
Government was similar to his previous suggestion to Vice President
Wallace and that the general argument of the Generalissimo as set
forth to the Ambassador showed a discouraging lack of progress in the
thinking of the Generalissimo in view of his own professed desire to
reach a settlement with the Chinese Communists and in view of dis-
sident developments in other areas not under Chinese Communist
influence. The Secretary then suggested that the Ambassador might
tell the Generalissimo that if the latter would arrange a meeting the
Ambassador would be prepared to speak to the Communist represent-
ative in Chungking along the same general lines as the Ambassador
and the Vice President had spoken to him ; that the Ambassador would
point out to the Communist representative that unity in China in
prosecuting the war and in preparing for the peace was urgently neces-
sary ; that a spirit of tolerance and good will — of give and take — was
essential in achieving such unity; that Chinese of every shade of
political thinking should cooperate now to defeat the J apanese ; and
that differences could be settled if the major objective of victory was
kept firmly in mind. The Ambassador was requested to inform
Chiang (1) that the President and the Secretary felt that Mr. Gauss’
suggestion for a coalition council was deserving of careful considera-
tion; (2) that they were concerned, not only regarding non -settlement
with the Chinese Communists, but also with regard to reports of dis-
content and dissidence in other parts of the country among non-
Communist Chinese; (3) that they were not interested in the Com-
munists or other dissident elements as such, but were anxious that the
Chinese people develop and utilize, under the leadership of a strong
representative and tolerant government, the physical and spiritual
resources at their command in carrying on the war and establishing
a durable democratic peace. 3

* See annex 46.

64

U. S. RELATIONS WITH CHINA

PESSIMISM OF AMBASSADOR GAUSS

Although Ambassador Gauss transmitted this message to Chiang
Kai-shek, he doubted that the Generalissimo would take the necessary
steps or was even capable of doing so. He was also pessimistic over
the prospects for negotiation with the Communists in view of the deep
suspicion on both sides and inability to recognize realities. He even
questioned the Chinese desire to cooperate actively in the war against
Japan. The reports from the Embassy during October and early
November present a depressing picture of a deteriorating situation,
characterized by internal squabbles and apathy.

The discouraging conclusions of Ambassador Gauss were further
reinforced from a source other than the Embassy or the Consulates.
Several Foreign Service officers, all specialists in the Far East, at
the request of the United States Army, were attached to the staff of
the Commanding General of the China-Burma-India (later China)
Theater for liaison duties. These officers had a unique opportunity,
through travel and contacts with American and Chinese Military
authorities, to observe conditions and report their reactions. These
reports were made available to American officials concerned. The
memoranda of these officers were prepared on a wide range of subjects
and during a period of over two years, from early 1943 to early 1945,
when the end of the war with J apan was not yet recognized as immi-
nent. They show the development of the following themes :

1. Russian intentions with respect to the Far East, including China,
are aggressive.

2. The Chinese Communists have a background of subservience to
the U. S. S. R., but new influences — principally nationalism — have
come into play which are modifying their outlook.

3. The Chinese Communists have become the most dynamic force
in China and are challenging the Kuomintang for control of the
country.

4. The Kuomintang and National Government are disintegrating.

5. The rivalry between these two forces threatens to culminate in a
civil war which (a) would hamper the conduct of the war against
Japan, (b) would press the Communists back into the arms of the
U. S. S. R. and (c) might well lead eventually to American Soviet
involvement and conflict.

6. The Communists would inevitably win such a war because the
foreign Powers, including the United States, which would support the
Government, could not feasibly supply enough aid to compensate for
the organic weaknesses of the Government.

7. In this unhappy dilemma, the United States should attempt to
prevent the disaster of a civil war through adjustment of the new align-

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 65

ment of power in China by peaceful processes. The desirable means to
this end is to encourage the reform and revitalization of the Kuo-
mintang so that it may survive as a significant force in a coalition
government. If this fails, we must limit our involvement with the Kuo-
mintang and must commence some cooperation with the Communists,
the force destined to control China, in an effort to influence them
further into an independent position friendly to the United States.
We are working against time because, if the U. S. S. R. enters the war
against Japan and invades China before either of these alternatives
succeeds, the Communists will be captured by the U. S. S. R. and be-
come Soviet satellites.

8. A policy of this description would also — and this is a decisive con-
sideration in the war against Japan — measurably aid our war effort. 4

THE MILITARY FACTOR

As serious as were the other factors which contributed to the general
deterioration during 1944 the most crucial point certainly, and the
one which loomed largest in official American thinking, was the disin-
tegration of the military situation which threatened the collapse of
the entire Chinese war effort. It was this military factor which most
immediately concerned American officials. Signs of military disinte-
gration appeared in the spring, assumed major proportions during
the summer, and eventuated in disaster during the fall. On April 17
the Japanese launched an attack southward across the Yellow River
which marked the beginning of their campaign to open the Peiping-
Hankow Railroad. On May 18 Loyang in the Yellow River area was
captured and the remnants of Tang En-po’s troops were set upon by
the local populace. With the capture of Kaifeng the entire Honan
front collapsed.

On May 27 the Japanese opened the drive southward into Hunan
Province across the Yangtze and along the Hankow-Canton Railroad.
On June 6, Huan-Chiang was occupied and the important center of
Changsha was flanked to the west. On June 18 Changsha was cap-
tured and ten days later Hengyang was surrounded, though it did not
fall until August 8. This placed the Japanese forces in a position
to mount an offensive against the strategic air base Kweilin. In mid-
August the J apanese mounted a new offensive in the coastal province
of Chekiang. This drive resulted in the capture of Lishui on August
28. In mid-September Japanese forces crossed from Hunan into
Kwangsi Province.

During the ensuing weeks J apanese forces from the north and south-
east converged on Kweilin, which fell on November 12. With this

4 See annex 47.

TJ. S. RELATIONS WITH CHINA

66

development the entire East China front had collapsed and there was
little reason to believe that the Japanese if they so elected would not
have the capability of attacking Chungking and the vitally important
American base at Kunming. The situation was further complicated
by reverses on the Salween front in Burma. Increasingly it had be-
come apparent that the Chinese war effort had largely ceased to be an
effective factor in China and that to a disturbing extent the Chinese
will to fight had vanished. The main Nationalist effort was being con-
centrated on containment of Communists in the north and in internal
political squabbles in Chungking. It was only in Burma, where the
Chinese troops were under the direct command of General Stilwell,
that Chinese ground forces were making a distinct military contri-
bution.

president roosevelt’s messages to generalissimo

CHIANG KAI-SHEK, JULY-AUGUST 1944

It was particularly this rapidly disintegrating military situation
in East China which gave the most serious concern to President Roose-
velt. As he saw it the first step in the solution would be the appoint-
ment of an American general to the command of all Chinese armies.
On July 7, 1944, the President sent the following message to the
Generalissimo:

“The critical situation which now exists in my opinion calls for
the delegation to one individual of the powers to coordinate all the
Allied military resources in China, including the Communist forces.
... I am promoting Stilwell to the rank of full General and I
recommend for your most urgent consideration that you recall him
from Burma and place him directly under you in the command of all
Chinese and American forces, and that you charge him with the full
responsibility and authority for the coordination and direction of the
operations required to stem the tide of the enemy’s forces. I feel that
the case of China is so desperate that if radical and promptly applied
remedies are not immediately effected, our common cause will suffer
a disastrous setback.”

The Generalissimo agreed to this proposal in principle but sug-
gested that as a preliminary step a high ranking American official
well acquainted with political as well as military matters and having
the complete confidence of the President be sent to Chungking to
discuss the problem. On J uly 15 the President replied as follows :

“I am very glad to learn that in principle you are in agreement
with the proposal to place General Stilwell in absolute command
under you of the Chinese troops without any hindrance. . . I am
searching for a personal representative with far sightedness and po-

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 67

litical ability to collaborate with you. . . In the meantime I again

urge you to take all steps to pave the way for General Stilwell’s as-
sumption of command at the earliest possible moment.”

The President followed up this message with another one of
August 10 :

“I have this proposal to make: That General Patrick J.
Hurley ... be designated by me as my personal representative
with you. . . He should be of great service in adjusting relations

between you and General Stilwell. . . .”

The President also proposed that Mr. Donald Nelson accompany
General Hurley to deal with lend-lease and other economic matters.
The Generalissimo accepted the proposal.

On August 23 the President again urged on the Generalissimo the
appointment of General Stilwell to the command of all Chinese Armies
in the following message :

“I am glad that you find General Hurley and Mr. Nelson acceptable
for the important mission they will perform for us. Now that my
personal representatives to you have been decided upon, I think we
should proceed immediately to take the positive steps demanded by
the military situation. I urge that you take the necessary measures
to place General Stilwell in command of the Chinese forces, under
your direction, at the earliest possible date. ... I feel certain, how-
ever, that between General Hurley and General Stilwell there will be
an adequate comprehension of the political problems you face. I am
urging action in the matter of Stilwell’s appointment so strongly
because I feel that, with further delay, it may be too late to avert a
military catastrophe tragic both to China and to our allied plans for
the early overthrow of J apan. ... I do not think the forces to come
under General Stilwell’s command should be limited except by their
availability to defend China and fight the Japanese. When the enemy
is pressing us toward possible disaster, it appears unsound to reject
the aid of anyone who will kill J apanese. ... I feel sure that Gen-
eral Hurley will be highly useful in promoting relations which will
facilitate General Stilwell’s exercise of command and his understand-
ing of the related political problems. . . .”

Despite his earlier agreement in principle, the Generalissimo had
still failed to place General Stilwell in command and the relations be-
tween the two men became increasingly bad. By early September, the
military picture had become so ominous that the President felt com-
pelled to send still another message to the Generalissimo :

“After reading the last reports on the situation in China my Chiefs
of Staff and I are convinced that you are faced in the near future with
the disaster I have feared. ... I have urged time and again in

U. S. RELATIONS WITH CHINA

68

recent months that you take drastic action to resist the disaster which
has been moving closer to China and to you. Now, when you have
not yet placed General Stilwell in command of all forces in China, we
are faced with a loss of a critical area in East China with possible
catastrophic consequences.”

REPORTS BY GENERAL STILWELL

On September 22, General Stilwell reported to the Chief of Staff in
Washington his estimate of the Generalissimo’s actions :

“Chiang Kai-shek is following his usual policy. At first he readily
agreed to the command arrangement and also by inference agreed to
use the communist army under my command, then he began the delay-
ing action, which still continues. He protests that there are many
difficulties which have to be smoothed out and this takes time. Actu-
ally, he believes that our advance in the Pacific will be swift enough
and effective enough to spare his further effort, and he would like to
avoid the bitter pill of recognizing the communists and putting a
foreigner in command of the army. . . .”

On September 26, General Stilwell again reported to the Chief of

Staff as follows :

“Chiang Kai-shek has no intention of making further efforts to
prosecute the war. Anyone who crowds him toward such action will
be blocked or eliminated . . . Chiang Kai-shek believes he can
go on milking the United States for money and munitions by using
the old gag about quitting if he is not supported. He believes the war
in the Pacific is nearly over, and that by delaying tactics, he can throw
the entire burden on us. He has no intention of instituting any real
democratic regime or of forming a united front with the communists.
He himself is the main obstacle to the unification of China and her
cooperation in a real effort against Japan ... I am now convinced
that, for the reasons stated, the United States will not get any
real cooperation from China while Chiang Kai-shek is in power. I
believe he will only continue his policy and delay, while grabbing for
loans and postwar aid, for the purpose of maintaining his present
position, based on one-party government, a reactionary policy, or the
suppression of democratic ideas with the active aid of his gestapo.”

Shortly before his departure from China, General Stilwell gave
yet another estimate of the crisis involving himself to the Chief of

Staff : „ .

“It is not a choice between throwing me out or losing Chiang Kai-

shek and possibly China. It is a case of losing China’s potential effort
if Chiang Kai-shek is allowed to make removals now. I believe that
the solution to the problem lies in insisting on the acceptance of our

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 69

proposals yet at the same time giving the Generalissimo a boost in
prestige which will permit him to give his agreement without loss of
face or offense to the Chinese Nationalist spirit.”

By this time it had become apparent to General Hurley that the
relations between the Generalissimo and General Stilwell had reached
a point where no kind of a third party intervention could possibly
remedy the damage already done except by the removal of General
Stilwell, and furthermore, that no progress could be made in other
outstanding questions until a new American Supreme Commander
had been appointed. President Roosevelt accepted this point of view
and Major General Albert C. Wedemeyer was designated to replace
General Stilwell. There was seemingly no real effort made subse-
quently to have General Wedemeyer named to command all Chinese
armies. It should be remembered in this connection that by the end of
the year it was apparent that the Japanese did not intend to push be-
yond Kweilin for the capture of Chungking, and furthermore that the
serious military situation which had developed in Burma early in the
summer had been considerably alleviated.

In his final report to the War Department, General Stilwell
made the following comments in appraisal of the controversy
in which he had been a principal figure :

“However, as the level of command rose, national policies and politics
entered the picture with resulting deterioration in sincerity and in
cooperation. With the one exception of the Chinese Army in India
where General Stilwell had been given direct command of the forces,
the Americans enjoyed no command functions in the Chinese Army.
Elsewhere the Theater Commander lacked the right of ‘order’. Con-
sequently, having no overall control, he could neither form the
strategy nor direct the tactics. Holding in general to a purely advisory
role, the Americans were often regarded with a jaundiced look of
suspicion. In some instances our honest efforts, and our impartial
action demonstrated an altruistic motive which won the respect and
trust of certain field commanders. This favorable reaction to our
conduct did not always hold true in the Chungking Government. In
high places we were generally regarded as interlopers' of cunning de-
meanor distributing largesse, most of which failed to materialize.

“ ‘Aid to China 5 , once undertaken, should have been vigorously
prosecuted. Fortified with a full knowledge of China’s governmental
venality, her economic chaos, her military weakness, a written agree-
ment to a plan committing her to a vigorous prosecution of the war
under American supervision and material assistance should have been
signed before we tendered any aid.

“It became increasingly obvious that a more frank and vigorous
foreign policy would have helped to gain China’s whole-hearted cooper-

70

U. S. RELATIONS WITH CHINA

ation, and her acknowledgment that our cooperation depended upon
determined action on her part. The genial, parental admonishments
of our government had failed to persuade the head of China’s Central
Government to recognize his political opponents — not even as a con-
cession to the United States who regarded such recognition as* impor-
tant to the war effort. Certain factors entered into the picture, illumi-
nating the fallacy of political placation, vain promise, and shabby
support of a vacillating policy which drained public funds into a futile
transfusion.

“Japanese aggression imposed a temporary unity on the various
elements in struggling to determine whether China would progress
along democratic or authoritarian lines. Of these elements Chiang
Kai-shek was the strongest, and public opinion compelled him to
assume the symbol of national unified will.

“Faced with the Japanese offensive designed to disintegrate China
and bring about its collapse, Chiang chose to abandon national unity
and to steer a course seeking to dominate rather than to unify and lead.
He sought to dominate because he had no appreciation of what genuine
democracy means.

“The Kuomintang party, of which he is the leader, was once the
expression of genuine nationalistic feeling, but is now an uncertain
equilibrium of decadent, competing factions, with neither dynamic
principles nor a popular base. Chiang controls by manipulating these
functions with an adroit political sense. His seat is insecure. His
reluctance to expand military strength, his preoccupation with the
security of domestic supremacy, his suspicion of everyone around him,
and his increasing emotional instability betrayed a realization of this.
He became a hostage of the forces he manipulated.

“Nowhere does Clausewitz’s dictum that war is only the continuation
of politics by other methods apply with more force that it did in CBI.
In handling such an uncertain situation as existed in that theater of
war, the Americans would have done well to avoid committing them-
selves unalterably to Chiang, and adopted a more realistic attitude
toward China itself. We could gain little by supporting the attitude
of the Chiang regime. We could have gained much by exerting pres-
sure on Chiang to cooperate and achieve national unity, and if he
proved unable to do this, then in supporting those elements in China
which gave promise of such development.” 4a

4a The present treatment of the controversy surrounding General Stilwell does
not purport to be a full and complete account of that crisis. Only that material
has been used which would serve as background for the Mission of General Hurley.
It is the understanding of the Department of State that the National Military
Establishment is preparing a full history of World War II and that this period
will be more fully treated therein.

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 71

It was primarily to prevent that which did finally happen that
General Hurley was dispatched to China by President Roosevelt.
Once that crisis had been resolved with the appointment of General
Wedemeyer, General Hurley undertook to lend his good offices in other
problems.

GENERAL HURLEY’S INSTRUCTIONS

According to General Hurley’s report to the Department of State
his instructions from the White House dated August 18 were (1) to
serve as personal representative of the President to Generalissimo
Chiang Kai-shek; (2) to promote harmonious relations between
Chiang and General J oseph Stilwell and to facilitate the latter’s exer-
cise of command over the Chinese armies placed under his direction ;
(3) to perform certain additional duties respecting military supplies;
and (4) to maintain intimate contact with Ambassador Gauss. A few
months later, after his appointment as Ambassador, General Hurley
outlined his understanding of his mission and of United States
policy in China in the following terms: “(1) To prevent the col-
lapse of the National Government, (2) to sustain Chiang Kai-shek
as President of the Republic and Generalissimo of the Armies, (3) to
harmonize relations between the Generalissimo and the American Com-
mander, (4) to promote production of war supplies in China and pre-
vent economic collapse, and (5) to unify all the military forces in
China for the purpose of defeating Japan.”

GENERAL HURLEY’S TALK WITH MR. MOLOTOV

In company with Mr. Donald Nelson, chairman of the War Pro-
duction Board, and a Special Representative of President Roosevelt,
General Hurley had flown to Chungking by way of Moscow, where they
had discussed the Chinese situation with Foreign Minister Molotov.
According to Mr. Nelson’s report of this conversation, he explained
that his main business in China concerned economic matters and that
General Hurley’s concerned military matters ; that Chinese coopera-
tion in the war was of “vital importance”; and that to achieve this the
United States Government must support Generalissimo Chiang and
effect complete unity in China. In response to Mr. Nelson’s request for
Soviet opinion on this subject, Mr. Molotov replied that it was difficult
to judge the Chinese situation from Washington or Moscow but that he
would be willing to express some off-the-record thoughts. Mr. Molo-
tov’s remarks were summarized in the report as follows :

“Molotov then talked at length on the Generalissimo’s imprison-
ment at Sian in 1936 and said that relations between China and the

72

U. S. RELATIONS WITH CHINA

Soviet Union were tense at that time. However, he said that the
Soviet Government had turned its back on the Chinese revolutionary
groups led by Chang Hsueh-liang and Wang Ching-wei which in-
cluded many Communists and which looked to the Soviet Union for
sympathy and aid and had issued a statement to the effect that J apanese
provocation had been the cause of the uprising in Sian and other events
in China. Due to the political and moral support of the Soviet govern-
ment, Chiang had been allowed to return to the seat of his government
and the revolutionary leader (Chang Hsueh-liang) had been arrested.
The Soviets had hoped as a result of their action that Soviet-Chinese
relations would change for the better. However, the Chinese had
shown little interest in strengthening relations which had on the con-
trary deteriorated in recent years.

“ Although he said that the Soviet government had unjustifiably been
held responsible for various happenings in China during recent years,
Molotov stressed that it would bear no responsibility for internal
affairs or developments in China. Molotov then spoke of the very
impoverished conditions of the people in parts of China, some of
whom called themselves Communists but were related to Communism
in no way at all. It was merely a way of expressing dissatisfaction
with their economic condition and they would forget this political
inclination when their economic condition improved. The Soviet gov-
ernment should not be associated with these ‘communist elements’ nor
could it in any way be blamed for this situation. The solution of the
entire situation was to make the Chinese government work in the com-
mon interest and cope with the tasks before it and to make life more
normal in China. Molotov said in conclusion that the Soviets would be
glad if the United States aided the Chinese in unifying their country,
in improving their military and economic condition and in choosing for
this task their best people. . . . Molotov’s satisfaction at being con-
sulted was clearly indicated. He gave little new information but he
confirmed statements made previously that his government would be
glad to see the United States taking the lead economically, politically,
and militarily in Chinese affairs. Molotov made it clear also that
until Chiang Kai-shek tried by changes in his policies to improve Sino-
Soviet relations, the Soviet government did not intend to take any
interest in Chinese governmental affairs.”

The importance of this conversation is apparent from the frequent
references in General Hurley’s subsequent reports to Molotov’s expres-
sion of Soviet policy toward China.

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 73

II. THE EFFORT AT MEDIATION

INITIAL STEPS

Upon arriving at Chungking in September, General Hurley came to
the conclusion that the success of his mission “to unify all the military
forces in China for the purpose of defeating Japan 55 was dependent on
the negotiations already under way for the unification of Chinese
military forces. Accordingly, shortly after his arrival he undertook
active measures of mediation between the Chinese National Govern-
ment and the Chinese Communist Party.

In December 1944 General Hurley commented as follows regarding
his early efforts at reconciliation :

“At the time I came here Chiang Kai-shek believed that the Com-
munist Party in China was an instrument of the Soviet Government
in Russia. He is now convinced that the Russian Government does
not recognize the Chinese Communist Party as Communist at all and
that (1) Russia is not supporting the Communist Party in China,
(2) Russia does not want dissensions or civil war in China, and (3)
Russia desires more harmonious relations with China.

“These facts have gone far toward convincing Chiang Kai-shek
that the Communist Party in China is not an agent of the Soviet
Government. He now feels that he can reach a settlement with the
Communist Party as a Chinese political party without foreign en-
tanglements. When I first arrived, it was thought that civil war after
the close of the present war or perhaps before that time was inevitable.
Chiang Kai-shek is now convinced that by agreement with the Com-
munist Party of China he can (1) unite the military forces of China
against Japan, and (2) avoid civil strife in China. 55

With respect to specific steps taken by him, General Hurley reported
in December 1944 that with the consent, advice and direction of
the Generalissimo and members of his Cabinet and on the invitation
of leaders of the Communist Party, he had begun discussions with the
Communist Party and Communist military leaders for the purpose
of effecting an agreement to regroup, coordinate and unite the military
forces of China for the defeat of Japan. He continued : “The defeat
of Japan is, of course, the primary objective, but we should all under-
stand that if an agreement is not reached between the two great
military establishments of China, civil war will in all probability
ensue. 55

74

U. S. RELATIONS WITH CHINA

THE FIVE-POINT DRAFT AGREEMENT, NOVEMBER 10, 1944

Following discussions with Chinese Government and Chinese Com-
munist representatives in Chungking, General Hurley on November 7,
1944, flew to Yenan for a two-day conference with Mao Tse-tung, the
Chairman of the Central Executive Committee of the Chinese Com-
munist Party. The Communist leaders were impressed by the fact
that General Hurley had taken the initiative in making this
flight and cordial relations were established at once. As a result of
these discussions there was evolved at Yenan a five-point draft, entitled
“Agreement Between the National Government of China, the Kuomin-
tang of China and the Communist Party of China,” which was signed
by Mao Tse-tung as Chairman of the Central Executive Committee
of the Chinese Communist Party on November 10, 1944, and by Gen-
eral Hurley as a witness. This important agreement read as follows :

“(1) The Government of China, the Kuomintang of China and the
Communist Party of China will work together for the unification of
all military forces in China for the immediate defeat of Japan and
the reconstruction of China.

u (2) The present National Government is to be reorganized into a
coalition National Government embracing representatives of all anti-
Japanese parties and non-partisan political bodies. A new democratic
policy providing for reform in military, political, economic and cul-
tural affairs shall be promulgated and made effective. At the same
time the National Military Council is to be reorganized into the United
National Military Council consisting of representatives of all anti-
Japanese armies.

“(3) The coalition National Government will support the prin-
ciples of Sun Yat-sen for the establishment in China of a government
of the people, for the people and by the people. The coalition Na-
tional Government will pursue policies designed to promote progress
and democracy and to establish justice, freedom of conscience, freedom
of press, freedom of speech, freedom of assembly and association, the
right to petition the government for the redress of grievances, the right
of writ of habeas corpus and the right of residence. The coalition
National Government will also pursue policies intended to make
effective the two rights defined as freedom from fear and freedom
from want.

“(4) All anti- Japanese forces will observe and carry out the orders
of the coalition National Government and its United National Military
Council and will be recognized by the Government and the Military
Council. The supplies acquired from foreign powers will be
equitably distributed.

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 75

“(5) The coalition National Government of China recognizes the
legality of the Kuomintang of China, the Chinese Communist Party
and all anti- J apanese parties.”

THE THREE-POINT PLAN

General Hurley felt that this Five-Point Draft Agreement, which
he promptly submitted to the National Government, offered a prac-
tical plan for settlement with the Communists. National Government
leaders, however, said that the Communist plan was not acceptable.
The National Government submitted as counter-proposal a Three-
Point Agreement reading as follows :

(1) The National Government, desirous of securing effective uni-
fication and concentration of all military forces in China for the
purpose of accomplishing the speedy defeat of Japan, and looking
forward to the post-war reconstruction of China, agrees to incorporate,
after reorganization, the Chinese Communist forces in the National
Army who will then receive equal treatment as the other units in
respect of pay, allowance, munitions and other supplies, and to give
recognition to the Chinese Communist Party as a legal party.

“(2) The Communist Party undertakes to give their full support
to the National Government in the prosecution of the war of resistance,
and m the post-war reconstruction, and give over control of all their
troops to the National Government through the National Military
Council. The National Government will designate some high rank-
ing officers from among the Communist forces to membership in the
National Military Council.

“(3) The aim of the National Government to which the Communist
Party subscribes is to carry out the Three People’s Principles of Dr.
Sun Yat-sen for the establishment in China of a government of the
people, for the people and by the people and it will pursue policies
designed to promote the progress and development of democratic
processes in government.

“In accordance with the provisions of the Program of Armed Re-
sistance and National Reconstruction, freedom of speech, freedom of
the press, freedom of assembly and association and other civil liberties
are hereby guaranteed, subject only to the specific needs of security
m the effective prosecution of the war against Japan.”

REPLY OF THE CHINESE COMMUNISTS

This proposal was handed to General Chou En-lai, the Communist
representative in Chungking, on November 22 and was taken by him
to Yenan early in December. Following his arrival in Yenan, Gen-

76

U. S. RELATIONS WITH CHINA

eral Chou wrote General Hurley a letter, which the latter reported
as follows :

“The refusal of the Generalissimo and the National Government of
our minimum five point proposal, clearly showing disagreement with
our suggestions for a coalition government and united military coun-
cil and the submission of the three point counter-proposal, preclude
the possibility of my returning to Chungking for further negotiations.
We find it impossible to see any fundamental common basis in these
new proposals. We feel that publication of our five-point proposal is
now called for in order to inform the public and to bring out the chang-
ing attitude of the Government.

“Despite the fact that President Chiang has so limited the question
of military cooperation between us that no easy solution can be
achieved, we completely desire to continue to discuss with you and
General Wedemeyer 5 the concrete problems of our future military
cooperation and to continue the closest contact with the United States
Army Observers Section in Yenan. Chairman Mao Tse-tung has es-
pecially asked me to express his deep thanks and appreciation for
your sympathy and energetic efforts on behalf of unity in China.”

General Hurley reported that he was conferring daily with the
Generalissimo and members of his cabinet “endeavoring to liberalize
the counter-proposal. We are having some success. The General-
issimo states that he is anxious that the military forces of the Com-
munist Party in China and those of the National Government be
united to drive the invaders from China. The Communist leaders
declare this is also their objective. I have persuaded Chiang that in
order to unite the military forces in China and prevent civil conflict
it will be necessary for him and the Kuomintang and the National
Government to make liberal political concessions to the Communist
Party and to give them adequate representation in the National Gov-
ernment.”

General Hurley, who reported that all his communications with
Yenan without exception were sent with the full knowledge and
consent of the high officials of the National Government, wrote Chou
En-lai that it was his understanding that the five-point offer of settle-
ment proposed by the Chinese Communists was to form the basis
of discussion and was not a “take it or leave it” proposition ; that the
Communist Party was willing to consider suggestions for amendments
by the National Government and that the three-point offer in response
to the Communist proposal was not the final word of the National

* General Wedemeyer had replaced General Stilwell in November as com-
mander of United States forces in the China Theater.

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 77

Government. He regarded both instruments as steps in the nego-
tiations and it was his understanding that publication of the five-point
Communist proposal would be withheld while negotiations were pend-
ing. He did not believe that negotiations had been terminated unless
General Chou so wished them, and he knew that the National Gov-
ernment was disposed to make every effort to unify China. He felt
it would be a great tragedy if the door were closed at this critical hour
to further discussions.

General Chou replied to General Hurley on December 16, 1944,
stating that the unexpected and flat rejection by the Kuomintang of
the Communist five-point proposal caused a deadlock in the negotia-
tions and rendered his return to Chungking useless. He indicated
that this could not be construed as Communist discontent with the
United States and that he agreed with the advice of General Hurley
against the publication of the five points, but insisted that they should
be made public when the appropriate time came. The one funda-
mental difficulty with respect to these negotiations, he felt, was the
unwillingness of the Kuomintang to forsake one-party rule and accept
the proposal for a “democratic coalition government.”

General Hurley replied to General Chou En-lai in a telegram on
December 21, 1944, stating his belief that chances for success along
the general lines of the Communist proposals would be “brighter
than ever before if he would come again to Chungking.” On Decem-
ber 24, Mao Tse-tung telegraphed General Hurley stating that General
Chou was occupied with “important conference preparations” which
made his departure from Yenan difficult. Mao stated that the National
Government had not shown sufficient sincerity to warrant continuing
negotiations on the basis of the five-point proposal and he suggested
a conference in Yenan. On December 28, General Chou wrote General
Hurley that the Communists would not be willing to continue abstract
discussions on the question of accepting their proposal for a “demo-
cratic coalition government.” He proposed instead the following
four additional points which he requested the Ambassador to com-
municate to the Chinese Government authorities “to see whether they
are determined to realize democracy and unity”: (1) The release of
all political prisoners; (2) the withdrawal of Kuomintang forces sur-
rounding the border region and those attacking the new Fourth Army
and the South China Anti-Communist column; (3) the abolition of
all oppressive regulations restricting the people’s freedom ; and (4)
cessation of all secret service activity.

Ambassador Hurley replied in a letter dated January 7, 1945, ad-
dressed to Mao Tse-tung and Chou En-lai, stating that the additional
four points outlined in the latter’s letter of December 28 constituted

78

U. S. RELATIONS WITH CHINA

a departure from “our original agreed procedure which was to arrive
at an agreement on general principles before discussing specific de-
tails.” The Ambassador also stated that he was convinced that the
National Government was sincerely desirous of making such conces-
sions as would make a settlement possible, but that such matters could
not be discussed by telegram or letter. He suggested, after obtaining
the approval of the National Govermnent, that he make a brief visit
to Yenan, accompanied by Dr. T. V. Soong, Dr. Wang Shih-chieh, and
General Chang Chih-chung, to discuss matters in person and that Mao
Tse-tung and Chou En-lai might return with the foregoing group to
Chungking if agreement in principle were reached as a result of the
discussions in Yenan.

THE CONFERENCE AT CHUNGKING

In a reply to this proposal, on January 11, Mao Tse-tung stated that
the proposal for a conference between both parties at Yenan was
greatly appreciated but that he felt that nothing could be achieved
thereby. He proposed that a preparatory conference be called in
Chungking for the purpose of convening a National Affairs Con-
ference; that the preparatory conference include Kuomintang, Com-
munist and Democratic League delegates; that the proceedings of
the conference be made public; and that “the delegates have equal
standing and freedom to travel.” He added that if the National Gov-
ernment found these proposals acceptable General Chou would proceed
to Chungking for discussions. On January 20, the Ambassador wrote
Mao Tse-tung with the knowledge and approval of the Generalissimo
outlining certain changes that were contemplated in the National
Government. General Hurley added “it may well be that this measure
together with the other measures that have been offered by the National
Government may not be sufficient to satisfy the Chinese Communists,
but I think it would be a great pity if such far-reaching government
proposals were rejected out of hand without due consideration. As a
friend of China I suggest you send General Chou En-lai or any other
representative you may select to Chungking for a brief visit to talk
matters over with the Government. It need not take long; if he is
busy two or three days would be sufficient.” On January 23, the Am-
bassador was informed by Mao Tse-tung in reply that General Chou
was being sent to Chungking to negotiate with the Government.

THE NATIONAL GOVERNMENT’S PROPOSAL

Following the arrival of General Chou in Chungking on January
24 a series of conferences were held in which Dr. T. V. Soong, Acting
President of the Executive Yuan and Minister for Foreign Affairs,

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 79

Dr. Wang Shih-chieh, Minister of Information, and General Chang
Chih-chung, Director of Political Training of the National Ministries
Council, represented the National Government. General Chou rep-
resented the Chinese Communist Party and General Hurley attended
on the invitation of both parties. Dr. Wang Shih-chieh stated that
the National Government was prepared to take the following measures,
in addition to its previous three-point proposal :

“1. The Government will set up, in the Executive Yuan, an organ
whose nature resembles a war cabinet, with a membership of from
seven to nine men, to act as the policy making body of the Executive
Yuan. The Chinese Communist Party and other parties will be given
representation on this organ.

“2. The Generalissimo of the National Military Council will appoint
two Chinese Army officers (of whom one will be an officer of the
Chinese Communist troops) and one American Army officer to make
recommendations regarding the reorganization, equipment and sup-
plies of Chinese Communist troops, for approval by the Generalissimo
of the National Military Council.

“3. The Generalissimo of the National Military Council will appoint
one American Army officer as the immediate commander of Chinese
Communist troops for the duration of the war against Japan. The
said immediate commander of Chinese Communist troops shall be
responsible to the Generalissimo of the National Military Council.
He shall insure the observance and enforcement of all government
orders, military or nonmilitary, in the area under his control.”

THE COMMUNIST PARTY’S REACTION

Ambassador Hurley stated that he had no authority from his Gov-
ernment to agree that an American Army officer would participate as
indicated in the National Government’s proposal. General Chou
objected that Dr. Wang was not yet fully aware of the fundamental
aims of the Communists. Despite the Generalissimo’s New Year’s
speech, in which he had spoken of the necessity for adopting a consti-
tution at an early date and returning the control of the Government
to the people, it appeared to General Chou that Dr. Wang’s proposal
represented merely concessions made by the Kuomintang while that
party still retained control of the Government. General Chou re-
peated the position which he and Mao Tse-tung had expressed to
General Hurley when they had negotiated the original Five-Point
Agreement, namely, that the Communist Party would not submit the
command of its troops to the Kuomintang Party although it was pre-
pared to turn over command of its troops to the National Government
when the one-party rule of the Kuomintang had been abolished and

80

TJ. S. RELATIONS WITH CHINA

the Government had been reconstituted as a coalition administration
representing all parties. He would favor at such time establishing a
military commission to reorganize the Chinese armed forces, but he
would not agree that such a commission should be permitted to re-
organize only Communist troops. The entire Chinese military estab-
lishment should be reorganized and he would be glad to see an
American serve on such a commission.

CONFERENCE WITH THE GENERALISSIMO

This Communist Party position was made known to Generalissimo
Chiang at a conference attended by Ambassador Hurley, Dr. T. V.
Soong, and Dr. Wang Shih-chieh. The Ambassador reported that
Chiang pointed out that he was calling a meeting for May 4, in
keeping with the will of Dr. Sun Yat-sen, for the purpose of taking
steps to draft a constitution, to pass the control of the National Gov-
ernment to the people, and to abolish the one-party rule of the
Kuomintang. The Generalissimo made the definite statement that in
his opinion all the political parties in China including his own con-
stituted less than 2 percent of the Chinese people. He believed that
it would not be for the best interest of China to turn the control of
the Government over to any political group or to a coalition of polit-
ical groups. He felt it to be his duty to have a democratic constitu-
tion for China adopted by a convention in which all the people of
China, and not alone the organized political minorities, would partici-
pate. He expressed his belief that the Chinese Communist Party was
not in fact a democratic party and that it professed to be democratic
only for the purpose of trying to achieve control of the administration
of the National Government. The Ambassador suggested to the
Generalissimo that he was losing valuable time and again said that
he could afford to make political concessions and shorten the period
of transition in order to obtain control of the Communist forces.
Ambassador Hurley stated that the Generalissimo’s most important
objective at the moment should be unification of the Communist mili-
tary forces with those of the National Government. This would be
the first step toward China’s major objectives, namely : (1) unification
of all military forces to defeat Japan; (2) unification of China to
prevent outside forces from keeping China divided against itself;
(3) prevention of civil war in China and (4) a united, free, demo-
cratic China under a democratic constitution adopted by a convention
of the Chinese people.

After extended discussions Dr. Wang Shih-chieh and General Chou
En-lai were appointed to form a committee to draw up a proposal

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 81

which “would make action possible.” On February 3 Dr. Wang
Shih-chieh presented the following draft to the Ambassador :

“In order to intensify our war effort against the enemy and
strengthen our national unity, it is agreed that the National Govern-
ment should invite the representatives of the Kuomintang and other
parties, and some non-partisan leaders, to a consultative meeting.
This meeting is to be named the Political Consultation Conference,
and its membership is not to exceed persons.

“The function of this conference is to consider: (a) steps to be
taken in winding up the period of political tutelage and establishing
constitutional government, (b) the common political program to be
followed in the future and the unification of armed forces, and (c) the
form in which members of parties outside the Kuomintang will take
part in the National Government.

“If the said Political Consultation Conference succeeds in reaching
a unanimous conclusion, it will be submitted to the National Govern-
ment for consideration and execution. During the Political Consulta-
tion Conference, all parties should refrain from recriminations of anv
kind.”

General Chou En-lai informed the Ambassador that he was sending
a copy of the draft by telegram to Yenan and he added that for the
first time he felt that a basis for cooperation was being reached.
General Hurley reported that he discussed the draft with Generalis-
simo Chiang Kai-shek on February 4. In reporting this discussion
the Ambassador stated that the Generalissimo said he had consented
to the proposal but he felt that the Communists had obtained what
they had been endeavoring to obtain all along. Ambassador Hurley
told him “very frankly” that the only instrument heretofore with
which he could have worked with the Communists was the five-point
agreement ; that if he had revised that agreement at the time it was
offered, the Communists would probably have accepted reasonable
revision ; and that it was still the only document in which there was a
signed agreement by the Communists to submit control of their armed
forces to the National Government.

SUMMARY OF KUOMINTANG VIEWS

In the middle of February 1945 the Ambassador summarized the
views of the representatives of the Chinese Government during these
discussions. According to his report, the Government representa-
tives stated that the real purpose of the Chinese Communist Party
was not the abolition of the one-party rule by the Kuomintang but
rather, as indicated by all the maneuvers made by the Chinese Com-

82

U. S. RELATIONS WITH CHINA

munists, to overthrow control by the Kuomintang Party and obtain a
one-party rule of China by the Chinese Communist Party. The Kuo-
mintang desired to have a democratic constitution adopted and to
return the government to the people. It would not surrender its
authority in these troublous times to a coterie of parties in a so-called
coalition government. It would appoint a bi-partisan war cabinet
with policy-making powers but would retain control of the Govern-
ment until control was returned to the people under a democratic
constitution. The Generalissimo stated that he wanted the Commu-
nists to accept the latest offer of the Government, which was made in
good faith and with every possible guarantee that their armed forces
would not be destroyed or discriminated against. He said that the
Chinese Communists aimed to effect a coup by which they would take
control of the National Government and convert it into a one-party
Communist Government similar to that of Russia. He felt that the
Chinese Communist Party’s hopes for success were based on the fact
that they believed that if Russia entered the war in Asia it would sup-
port the Chinese Communists against the National Government. Chi-
ang pointed out that notwithstanding all this, the Government had
decided to undertake this bold measure for returning rule to the people
in the midst of war ; that now the Government invited the Communists
and other Party representatives, with complete freedom of travel, to
meet on an equal status for the purpose of intensifying efforts against
the enemy and strengthening national unity and to provide a program
for completing the period of tutelage and establishing a democratic
constitutional government.

ADJOURNMENT OF THE CONFERENCE

In concluding his report on these negotiations, General Hurley
stated : “I am convinced that our Government was right in its decision
to support the National Government of China and the leadership of
Chiang Kai-shek. I have not agreed to any principles or supported
any method that in my opinion would weaken the National Govern-
ment or the leadership of Chiang Kai-shek. I have, however, on many
occasions, advised the Generalissimo and Soong that China must fur-
nish her own leadership, make her own decisions and be responsible
for her own domestic and international policies.”

General Chou En-lai left Chungking for Yenan on February 16.
Prior to his departure he informed the Ambassador that he believed
that his Party would agree to the Political Consultation Conference
provided for in the proposal of the Chinese Government. He ex-
pressed the opinion, however, that one-party rule should be immedi-
ately ended and that a coalition administration should be instituted

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 83

to guide China in forming a democratic government based upon a
democratic constitution adopted by a people’s convention. General
Hurley departed from Chungking on February 19, 1945, for consul-
tation in Washington.

THE GENERALISSIMO’S STATEMENT OF MARCH 1, 1945

Generalissimo Chiang, in a public address on March 1, 1945 before
the Commission for the Inauguration of Constitutional Government,
reaffirmed his conviction that the solution of the Communist question
must be through political means and outlined the steps which the
Government had taken looking toward such solution. He stated :

“I have long held the conviction that the solution of the Communist
question must be through political means. The Government has la-
bored to make the settlement a political one. As the public is not well
informed on our recent efforts to reach a settlement with the Commu-
nists, time has come for me to clarify the atmosphere.

“As you know, negotiations with the Communists have been a peren-
nial problem for many years. It has been our unvarying experience
that no sooner is a demand met than fresh ones are raised. The latest
demand of the Communists is that the Government should forthwith
liquidate the Kuomintang rule, and surrender all power to a coalition
of various parties. The position of the Government is that it is ready
to admit other parties, including the Communists as well as non-parti-
san leaders, to participate in the Government, without, however,
relinquishment by the Kuomintang of its power of ultimate decision
and final responsibility until the convocation of the People’s Congress.
We have even offered to include the Communists and other parties in
an organ to be established along the lines of what is known abroad as
a ‘war cabinet’. To go beyond this and to yield to the Communist
demand would not only place the Government in open contravention
of the Political Program of Dr. Sun Yat-sen, but also create insur-
mountable practical difficulties for the country.

“The Government has not hesitated to meet the issues raised by the
Communists squarely. During his recent visit the Communist repre-
sentative, Chou En-lai, was told that the Government would be pre-
pared to set up in the Executive Yuan a policy-making body to be
known as the Wartime Political Council, to which other parties, includ-
ing the Communists, would have representation. In addition, he was
told that the Government would be ready to appoint a Commission
of three officers to make plans for the incorporation of the Communist
forces in the National Army, composed of one Government officer, one
Communist and one American, provided that the United States Gov-
ernment would agree to allow an American officer to serve. If the

84

U. S. RELATIONS WITH CHINA

United States Government could not agree, some other means of guar-
anteeing the safety of the Communist forces, and non-discrimination
in their treatment, could doubtless be evolved.

“No one mindful of the future of our four hundred and fifty million
people and conscious of standing at the bar of history would wish to
plunge the country into a civil war. The Government has shown its
readiness and is always ready to confer with the Communists to bring
about a real and lasting settlement with them.

“I have explained the Government’s position on the Communist prob-
lem at length, because today that is the main problem to unity and
constitutional government.

“I now turn to the concrete measures which the Government pro-
poses to take to realize constitutional government which I wish to
announce briefly :

“1. The People’s Congress to inaugurate constitutional government
will be convened on November 12 this year (the 80th birthday of Dr.
Sun Yat-sen) subject to the approval by the Kuomintang National
Congress which is due to meet in May.

“2. Upon the inauguration of constitutional government, all politi-
cal parties will have legal status and enjoy equality. (The Govern-
ment has offered to give legal recognition to the Communist Party as
soon as the latter agrees to incorporate its army and local administra-
tion in the National Government. The offer still stands.)

“3. The next session of the People’s Political Council with a larger
membership as well as more extensive powers will soon be sitting.
The Government will consider with the council the measures in regard
to the convening of the People’s Congress and all related matters.” 6

THE COMMUNIST PARTY’S REPLY, MARCH 9, 1945

On March 12, 1945, the American Embassy at Chungking was re-
quested to transmit the following letter, 7 dated March 9 from General
Chou to General Hurley, who was then in Washington :

“Your kind message of 20 February has been received.

“Under instructions from the Central Committee of my party and
from Chairman Mao Tse-tung I have sent a letter on the 9th of March
to Dr. Wang Shih-chieh, representative of the National Government,
containing the following two points of which I especially would like
to inform you about :

9 For complete text, see China Handbook , 1987-1945, p. 73.

T This message and a preceding one of Feb. 18 from General Chou to General
Hurley concern the question of Chinese Communist participation on the Chinese
delegation to the San Francisco Conference. For texts of Feb. 18 message and
reply by General Hurley, see annexes 48 (a) and 48 (b).

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 85

“1. The Central Committee of my party was originally planning
to draft our proposals in answer to Dr. Wang Shih-chieh’s proposal
of calling a political consultation conference, in order to facilitate
the discussions, and so it was all the more unexpected that President
Chiang Kai-shek on March 1, should have made a public statement op-
posing the abolition of one-party rule, the convening of an inter-party
conference and also the establishment of a coalition government, an-
nouncing instead the one-party Kuomintang government is preparing
to call on November 12 of this year that one-party controlled, deceit-
ful, China splitting, so-called National Congress, based on conditions
to which the people have no freedom, in which political parties and
groups have no legal status, and in which large areas of the country
have been lost making it impossible for the majority of the people to
take part.

“This clearly demonstrates that the Kuomintang government is ob-
stinately insisting on having their own way alone, thus on the one
hand showing that they have not the least sincerity of wanting to
carry out democratic reforms, and on the other it leaves no basis on
which negotiations between the Communist Party and the other demo-
cratic parties and the Kuomintang government can be continued in
these circumstances. The Central Committee of my party considers
that there is no longer the need to draft proposals in answer to Wang
Shih-chieh.

“2. The Central Committee of my party and Chairman Mao Tse-
tung are decidedly of the opinion that if Chinese delegates are to
represent the common will of the whole Chinese people at the San
Francisco Conference in April, then they must consist of representa-
tives of the Chinese Kuomintang, the Chinese Communist Party and
the Chinese Democratic League; and definitely there should not
be only Kuomintang government delegates attending the meeting.
America and England both have announced that their delegations
will consist of representatives from all important political parties
while your Honorable President has made known that the American
delegation will consist of an equal number from both the Democratic
and Republican parties ; but since the Chinese situation is so lacking
in unity, then, if the Kuomintang should try to monopolize the en-
tire delegation, this would be not only unjust or unreasonable, but it
would show that their standpoint is for wanting to split China. My
party has already officially put forth the above demands to the Kuo-
mintang government and suggested that Chou En-lai, Tung Pi-wu
and Chin Pang-hsien, three members of our Central Committee, join
the Chinese delegation. If this is not accepted by the Kuomintang
government, then my party will determinedly oppose the Kuomin-

86

U. S. RELATIONS WITH CHINA

tang splitting measure and reserve the right of expression on all opin-
ions and the actions of the monopolized delegation of the Kuomintang
government at the conference of the United Nations at San Francisco.

“Please inform your Honorable President of the above two proposals
as soon as possible and also express my deep appreciation for his inter-
est on behalf of Chinese unity. I extend to you my deepest personal
regards.”

In view of this sharp reaction by the Chinese Communist Party, ac-
tive negotiations between the Communists and the National Govern-
ment leaders looking toward the unification of China were broken off
at this time and were not resumed until the following summer. In
commenting on these negotiations, Ambassador Hurley stated :

“I pause to observe that in this dreary controversial chapter, two
fundamental facts are emerging : (1) the Communists are not in fact
Communists, they are striving for democratic principles; and (2)
the one party, one man personal Government of the Kuomintang is
not in fact fascist, it is striving for democratic principles. Both the
Communists and the Kuomintang have a long way to go, but if we
know the way, if we are clear minded, tolerant and patient, we can be
helpful. But it is most difficult to be patient at a time when the unified
military forces of China are so desperately needed in our war effort.”

III. THE PROBLEM OF MILITARY ASSISTANCE

AMBASSADOR HURLEY’S RECOMMENDATION AGAINST
AMERICAN AID TO THE CHINESE COMMUNISTS

Meanwhile, another problem had arisen shortly before the Ambas-
sador’s departure for Washington. This was the problem of supply-
ing American arms and equipment to groups in China other than the
National Government. The Ambassador recommended that “all such
requests, no matter how reasonable they may seem to be, be universally
refused until or unless they receive the sanction of the National Gov-
ernment and of the American Government.” It was his “steadfast
position that all armed warlords, armed partisans and the armed forces
of the Chinese Communists must without exception submit to the con-
trol of the National Government before China can in fact have a
unified military force or unified government.” The Ambassador fol-
lowed this policy in connection with a request from General Chu Teh
in January 1945 that the United States Army lend the Communist
forces 20 million dollars in United States currency for use in procur-
ing the defection of officers and men of the Chinese puppet govern-
ment together with their arms and for use in encouraging sabotage

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 87

and demolition work by puppet troops behind the Japanese lines.
General Chu informed General Wedemeyer that his forces would as-
sume full responsibility for repayment of the loan following victory
over Japan and in support of his request submitted a document claim-
ing that during 1944 Communist forces won over 34,167 Chinese
puppet troops with 20,850 rifles, sidearms, mortars, field pieces, etc.
The document estimated that with American financial help puppet
defections during 1945 could be increased to 90,000 men. In com-
menting on this proposal the Ambassador stated :

“While financial assistance of the type requested by General Chu
might in the end prove to be more economical than importing a similar
quantity of arms and ammunition from the United States for use
against Japan, I am of the firm opinion that such help would be iden-
tical to supplying arms to the Communist armed Party and would,
therefore, be a dangerous precedent. The established policy of the
United States to prevent the collapse of the National Government and
to sustain Chiang Kai-shek as president of the Government and Gen-
eralissimo of the Armies would be defeated by acceptance of the Com-
munist Party’s plan or by granting the lend-lease and monetary as-
sistance requested by General Chu Teh.”

THE AMERICAN CHARGE’S RECOMMENDATIONS

Shortly after the arrival of General Hurley in Washington for con-
sultation the question of supplying arms and military equipment to
the Chinese Communist forces was raised by the American Charge
d’Affaires at Chungking, George Atcheson, in the communication to
the Department of State paraphrased below. The Charge had report-
ed on February 26 that since the conclusion of negotiations with the
Communists there had been a growing impression among observers
there that for various reasons the Generalissimo had greatly stiffened
his attitude toward the Communists and toward the continuing faint
hopes held by some liberals that a settlement might still eventually
be possible.

It appears that the situation in China is developing in some ways
which are neither conducive to the future unity and peace of China
nor to the effective prosecution of the war.

A necessary initial step in handling the problem was the recent
American endeavor to assist compromise between the factions in
China through diplomatic and persuasive means. Not only was
unity correctly regarded as the essence of China’s most effective
conduct of the war, but also of the speedy, peaceful emergence of a
China which would be united, democratic, and strong.

88

U. S. RELATIONS WITH CHINA

However, the rapid development of United States Army plans
for rebuilding the armies of Chiang Kai-shek, the increase of addi-
tional aid such as that of the War Production Board, the cessation
of J apanese offensives, the opening of the road into China, the ex-
pectation that the Central Government will participate at San Fran-
cisco in making important decisions, the conviction that we are deter-
mined upon definite support and strengthening of the Central Gov-
ernment alone and as the sole possible channel for assistance to other
groups, the foregoing circumstances have combined to increase
Chiang Kai-shek’s feeling of strength greatly. They have resulted
in lack of willingness to make any compromise and unrealistic
optimism on the part of Chiang Kai-shek.

Among other things, this attitude is reflected in hopes of an early
settlement with the Soviet Union without settlement of the Com-
munist problem, when nothing was ultimately offered except an
advisory inter-party committee without place or power in the
Government, and in recent appointments of a military-political
character, placing strong anti-Communists in strategic war areas,
and naming reactionaries to high administrative posts, such as Gen-
eral Ho Kuo Kuang, previously Commander-in-Chief of Gendar-
merie, as Chairman of Formosa; and Admiral Chan Chak, Tai Li
subordinate, as mayor of Canton.

On their part, the Communists have arrived at the conclusion
that we are definitely committed to the support of Chiang Kai-shek
alone, and that Chiang’s hand will not be forced by us so that we
may be able to assist or cooperate with the Communists. Conse-
quently, in what is regarded by them as self-protection, they are
adopting the course of action which was forecast in statements made
by Communist leaders last summer in the event they were still ex-
cluded from consideration, of increasing their forces actively and
expanding their areas to the south aggressively, reaching southeast
China, regardless of nominal control by the Kuomintang. We
previously reported to the Department extensive movements and
conflicts with forces of the Central Government already occurring.

It is the intention of the Communists, in seizing time by the fore-
lock, to take advantage of East China’s isolation by the capture of
the Canton-Hankow Kailway by Japan to render themselves as
nearly invincible as they can before the new armies of Chiang Kai-
shek, which are being formed in Yunnan at the present time, are pre-
pared; and to present to us the dilemma of refusing or accepting
their assistance if our forces land at any point on the coast of China.
There is now talk by Communists close to the leaders of the need of
seeking Soviet aid. Active .consideration is being given to the crea-

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 89

tion of a unified council of their various independent guerrilla gov-
ernments by the party itself, which is broadcasting demands for Com-
munist and other non-Kuomintang representations at San Francisco.

Despite the fact that our actions in our refusal to aid or deal with
any group other than the Central Government have been diplomati-
cally correct, and our intentions have been good, the conclusion
appears clear that if this situation continues, and if our analysis of
it is correct, the probable outbreak of disastrous civil conflict will be
accelerated and chaos in China will be inevitable.

It is apparent that even for the present this situation, wherein we
are precluded from cooperating with the strategically situated, large
and aggressive armies and organized population of the Communist
areas, and also with the forces like the Li Chi-shen-Tsai Ting-k’ai
group in the southeast, is, from a military standpoint, hampering
and unsatisfactory. From a long-range viewpoint, as set forth
above, the situation is also dangerous to American interests.

If the situation is not checked, it is likely to develop with increas-
ing acceleration, as the tempo of the war in China and the entire Far
East is raised, and the inevitable resolution of the internal conflict in
China becomes more imperative. It will be dangerous to permit
matters to drift ; the time is short.

In the event the high military authorities of the United States
agree that some cooperation is desirable or necessary with the Com-
munists and with other groups who have proved that they are willing
and in a position to fight Japan, it is our belief that the paramount
and immediate consideration of military necessity should be made
the basis for a further step in the policy of the United States. A fa-
vorable opportunity for discussion of this matter should be afforded
by the presence of General Wedemeyer and General Hurley in
Washington.

The initial step which we propose for consideration, predicated
upon the assumption of the existence of the military necessity, is that
the President inform Chiang Kai-shek in definite terms that we are
required by military necessity to cooperate with and supply the Com-
munists and other suitable groups who can aid in this war against
the Japanese, and that to accomplish this end, we are taking direct
steps. Under existing conditions, this would not include forces
which are not in actual position to attack the enemy, such as the
Szechwan warlords. Chiang Kai-shek can be assured by us that we
do not contemplate reduction of our assistance to the Central Gov-
ernment. Because of transport difficulties, any assistance we give to
the Communists or to other groups must be on a small scale at first.
It will be less than the natural increase in the flow of supplies into

90

U. S. RELATIONS WITH CHINA

China, in all probability. We may include a statement that we
will furnish the Central Government with information as to the type
and extent of such assistance. In addition, we can inform Chiang
Kai-shek that it will be possible for us to use our cooperation and
supplies as a lever to restrict them to their present areas and to limit
aggressive and independent action on their part. Also we can indi-
cate the advantages of having the Communists assisted by the United
States instead of seeking direct or indirect help or intervention from
the Soviet Union.

Chiang Kai-shek might also be told, if it is regarded as advisable,
at the time of making this statement to him, that while our endeavor
to persuade the various groups of the desirability of unification has
failed and it is not possible for us to delay measures for the most
effective prosecution of the war any longer, we regard it as obviously
desirable that our military aid to all groups be based upon coordina-
tion of military command and upon unity, that we are prepared,
where it is feasible, and when requested, to lend our good offices to
this end, and although we believe the proposals should come from
Chiang Kai-shek, we would be disposed to support the following :

First, formation of something along the line of a war cabinet
or supreme war council in which Communists and other groups
would be effectively represented, and which would have some part in
responsibility for executing and formulating joint plans for war;
second, nominal incorporation of Communist and other forces se-
lected into the armies of the Central Government, under the opera-
tional command of United States officers designated by Chiang
Kai-shek upon General Wedemeyer’s advice, upon agreement by
all parties that these forces would operate only within their existing
areas or areas which have been specifically extended. However, it
should be clearly stated that our decision to cooperate with any
forces able to assist the war effort will neither be delayed by nor con-
tingent upon the completion of such internal Chinese arrangements.

It is our belief that such a modus operandi would serve as an
initial move toward complete solution of the problem of final entire
unity, and would bridge the existing deadlock in China. The prin-
cipal and over-riding issues have become clear, as one result of the
recent negotiations. At the present time, Chiang Kai-shek will not
take any forward step which will mean loss of face, personal power,
or prestige. Without guarantees in which they believe, the Com-
munists will not take any forward step involving dispersion and
eventual elimination of their forces, upon which depend their
strength at this time and their political existence in the future.
The force required to break this deadlock will be exerted on both

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 91

parties by the step we propose to take. The modus operandi set
forth in these two proposals should initiate concrete military co-
operation, with political cooperation as an inevitable result, and
consequently furnish a foundation for increasing development
toward unity in the future.

The political consultation committee plan, which could function,
if adopted, side by side with the Government and the war council,
would not be excluded by these proposals. It should be anticipated
that the committee would be greatly strengthened, in fact.

Of course, the statements to the Generalissimo should be made
in private, but the possibility would be clearly understood, in case
of his refusal to accept it, of the logical, much more drastic step
of a public expression of policy such as that which was made by
Churchill with reference to Yugoslavia.

The fact of our aid to the Communists and other forces would
shortly become known throughout China, however, even if not
made public. It is our belief that profound and desirable political
effects in China would result from this. A tremendous internal
pressure for unity exists in China, based upon compromise with
the Communists and an opportunity for self-expression on the part
of the now repressed liberal groups. Even inside the Kuomintang,
these liberal groups such as the Sun Fo group, and the minor
parties, were ignored in recent negotiations by the Kuomintang,
although not by the Communists, with whom they present what
amounts to a united front, and they are discouraged and dis-
illusioned by what they regard as an American commitment to the
Kuomintang’s existing reactionary leadership. We would prove we
are not so committed by the steps which we proposed, we would
markedly improve the prestige and morale of these liberal groups,
and the strongest possible influence would be exerted by us by
means of these internal forces to impel Chiang Kai-shek to make
the concessions required for unity and to put his own house in
order.

Such a policy would unquestionably be greatly welcomed by the
vast majority of the people of China, even though not by the very
small reactionary minority by which the Kuomintang is controlled,
and American prestige would be increased by it.

The statement has been made to a responsible American by Sun
Fo himself that if Chiang Kai-shek were told, not asked, regarding
United States aid to Communists and guerrillas, this would do
more to make Chiang Kai-shek come to terms with them than any
other course of action. It is believed by the majority of the people
of China that settlement of China’s internal problems is more a mat-

92

U. S. RELATIONS WITH CHINA

ter of reform of the Kuomintang itself than a matter of mutual
concessions. The Chinese also state, with justification, that Ameri-
can non-intervention in China cannot avoid being intervention in
favor of the conservative leadership which exists at the present time.

In addition, by a policy such as this, which we feel realistically
accepts the facts in China, we could expect to obtain the cooperation
of all the forces of China in the war; to hold the Communists to
our side instead of throwing them into the arms of the Soviet Union,
which is inevitable otherwise in the event the U.S.S.R. enters the
war against Japan; to convince the Kuomintang that its apparent
plans for eventual civil war are undesirable; and to bring about
some unification, even if not immediately complete, that would
furnish a basis for peaceful development toward complete de-
mocracy in the future.

General Hurley strongly opposed the course of action recommended
above and it remained the policy of the United States to supply
military materiel and financial support only to the recognized Chinese
National Government. 8

IV. CHINA AND THE SOVIET UNION

AGENDA FOR DR. SOONG’S MOSCOW CONVERSATIONS

Shortly before his visit to Washington Ambassador Hurley had
raised the question of negotiations between the Chinese National
Government and the Soviet Government. On February 4 the Am-
bassador reported to the Department of State that the Chinese Gov-
ernment contemplated sending Dr. T. V. Soong to Moscow for a
conference as a personal representative of the Generalissimo. He
transmitted a tentative agenda for the conference which the Chinese
Government had prepared and added that the Chinese Government
had asked for changes or suggestions in the agenda. His telegram
concluded as follows :

“In connection with this situation bear in mind that early last
September Ambassador Harriman, Mr. Nelson and myself conferred
with Mr. Molotov on the Soviet attitude toward the Communists in
China, believing that understanding of this was essential to settlement
of the Chinese Communist and National Government controversy.
Mr. Molotov stated roughly as follows :

8 For a detailed account of United States aid to China prior to, during and

subsequent to this period, see chapter I, pp. 26-28, the sections on military aid and
financial aid in Chapters V and VIII, and annexes 171 and 185.

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 93

“ (1) The so-called Chinese Communists are not in fact Communists
at all.

“(2) The Soviet Government is not supporting the Chinese
Communists.

“(3) The Soviets do not desire dissensions or civil war in China.

“(4) The Soviets complain of Chinese treatment of Soviet citizens
in China but frankly desire closer and more harmonious relations in
China. . . . The Chinese are anxious to ascertain if the Soviet
attitude continues as outlined last September by Molotov. On this
I am unable to give any definite assurances for the simple reason that
I do not know.”

In response to this report the Acting Secretary of State, J oseph C.
Grew, informed the Ambassador on February 6 as follows:

“On the subject of your telegram, we feel, and believe you will con-
cur in our opinion, that while we are at all times anxious to be helpful
to the Chinese Government we should not permit the Chinese Govern-
ment to gain the impression that we are prepared to assume responsi-
bility as ‘advisor’ to it in its relations with the USSR. Former Vice
President Wallace, with the subsequent approval of the President,
indicated clearly last summer to Chiang Kai-shek in response to a
suggestion by Chiang that the United States could not be expected to
act as ‘mediator’ between China and Russia. Furthermore, the Presi-
dent in a message to the Generalissimo 9 transmitted through the Em-
bassy in July 1944 stated that a conference between Chinese and
Russian representatives would be greatly facilitated if, prior thereto,
the Chinese Government had reached a working arrangement with the
Chinese Communists for effective prosecution of the war against J apan.
In a message to the Embassy at Chungking in September 1944, the
President and the Secretary expressed views, for communicating by
Ambassador Gauss to Chiang Kai-shek with regard to importance of
reaching such a ‘working arrangement’.

“With particular reference to the proposed agenda, we feel that the
Chinese must reach their own decision with regard to what questions
they should (or should not) discuss with the Russians and that we
ought not take it upon ourselves to place a caveat upon or to sponsor
discussion of any particular question. . . . With reference to your
final and ultimate paragraphs, we have no concrete information which
runs counter to the four points mentioned by you. We appreciate
receiving your report on this matter and hope that you will keep us

• This message and related ones concern the conversations between Vice Presi-
dent WaUace and the GeneraUssimo. They will be found in annex 43 to
chapter II.

94

U. S. RELATIONS WITH CHINA

informed of developments. You will, of course, know best how to
handle discussions on the subject with the Chinese in a manner which
will be helpful to them and unprejudicial to our position.”

By telegram dated February 18 General Hurley answered:

“I had prepared a reply to your message which I did not send. In
your message you appear to have reduced my role in these negotiations
to the position of merely making a suggestion without implementing
the suggestion. That is the method followed by Ambassador Gauss
when he transmitted the President’s and the Secretary of State’s mes-
sage on September 9 last. That message, as you now know, obtained
no results whatever because it lacked vigorous implementation. I
decided, however, not to send the telegram as I hoped to see you and
discuss the situation more fully. It is my earnest desire to be amenable
to every suggestion from the State Department even when I believe
our position is weakened and accomplishment postponed by lack of
vigorous implementation of suggestions. Perhaps this respite in nego-
tiations and my visit with the State Department will clarify in my
mind the distance I will be able to go in promotion of the war effort
by inducing or compelling the unification of Chinese armed forces
and the coordination of effort to assist us in the defeat of Japan.”

AMBASSADOR HURLEY’S INTERVIEW WITH MARSHAL STALIN,
APRIL 15, 1945

After consultation in Washington, the Ambassador departed on
April 3, 1945, for Chungking. He travelled by way of London and
Moscow in order to discuss American policy in China with British
and Soviet leaders. He reported to the Department of State that on
the night of April 15, 1945, he had concluded a conference with
Marshal Stalin and Foreign Minister Molotov in which the Ambassa-
dor, Mr. Harriman, had also participated. With respect to this con-
ference General Hurley reported to the Department that he had
recited for Marshal Stalin in the presence of Mr. Molotov his analysis
of Mr. Molotov’s earlier statement respecting the Soviet attitude
toward the Chinese Communist Party and the National Government.
His report, dated April 17, continued :

“My analysis was briefly as follows: ‘Molotov said at the former
conference that the Chinese Communists are not in fact Communists
at all. Their objective is to obtain what they look upon as necessary
and just reformations in China. The Soviet Union is not supporting
the Chinese Communist Party. The Soviet Union does not desire in-
ternal dissension or civil war in China. The Government of the Soviet
Union wants closer and more harmonious relations in China. The

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 95

Soviet Union is intensely interested in what is happening in Sinkiang
and other places and will insist that the Chinese Government prevent
discriminations against Soviet Nationals.’ Molotov agreed to this
analysis. I then outlined for Stalin and Molotov existing relations
between the Chinese Government and the Chinese Communist Party.
I stated with frankness that I had been instrumental in instituting con-
ferences and negotiations between the Chinese Communist Party and
the Chinese Government. I then presented in brief form an outline
of the negotiations, of the progress which had been made and of the
present status. I informed Stalin that both the Chinese Government
and the Chinese Communist Party claimed to follow the principles of
Sun Yat-sen for the establishment of a government of the people, by
the people and for the people in China. I continued that the National
Government and the Chinese Communist Party are both strongly anti-
Japanese and that the purpose of both is to drive the Japanese from
China.- Beyond question there are issues between the Chinese Com-
munist Party and the Chinese Government, but both are pursuing the
same principal objective, namely, the defeat of Japan and the creating
of a free, democratic and united government in China. Because of
past conflicts there are many differences on details existing between
the two parties. I made clear American insistence that China supply
its own leadership, arrive at its own decisions, and be responsible for
its own policies. With this in mind, the United States had endorsed
China’s aspirations to establish a free, united government and sup-
ported all efforts for the unification of the armed forces of China. I
informed him that President Roosevelt had authorized me to discuss
this subject with Prime Minister Churchill and that the complete
concurrence of Prime Minister Churchill and Foreign Secretary Eden
had been obtained in the policy of endorsement of Chinese aspirations
to establish for herself a united, free, and democratic government and
for the unification of all armed forces in China in order to bring about
the defeat of Japan. To promote the foregoing program it had been
decided to support the National Government of China under the lead-
ership of Chiang Kai-shek. Stalin stated frankly that the Soviet
Government would support the policy. He added that he would be
glad to cooperate with the United States and Britain in achieving
unification of the military forces in China. He spoke favorably of
Chiang Kai-shek and said that while there had been corruption among
certain officials of the National Government of China, he knew that
Chiang Kai-shek was ‘selfless’, ‘a patriot’ and that the Soviet in times
past had befriended him. I then related to Stalin and Molotov the
request made by the Chinese Communists for representation at the
San Francisco Conference. I told them that before leaving China I

96

U. S. RELATIONS WITH CHINA

had advised the Chinese Communists that the conference at San
Francisco was to be a conference of governments and not of political
parties and that I had advised the Communists to request representa-
tion at San Francisco through the National Government of the Re-
public of China. I told him that this decision had been upheld by
President Roosevelt and that the President had advised Chiang Kai-
shek of the advisability of the National Government’s permitting the
Chinese Communist Party to be represented on the Chinese National
Government’s delegation to the conference at San Francisco. I told
the Marshal that it was a very hopeful sign when Chiang Kai-shek
offered a place on the delegation to San Francisco to a Chinese Com-
munist and that the appointment had been accepted. I told Stalin
that I thought it was very hopeful that a leading member of the
Chinese Communist Party would be a delegate of the Chinese National
Government at San Francisco. Stalin agreed that this development
was very significant and he approved. I told him that President
Roosevelt and Prime Minister Churchill had indicated their approval
of the policy outlined. The Marshal was pleased and expressed his
concurrence and said in view of the over-all situation, he wished us
to know that we would have his complete support in immediate action
for the unification of the armed forces of China with full recognition
of the National Government under the leadership of Chiang Kai-shek.
In short, Stalin agreed unqualifiedly to America’s policy in China as
outlined to him during the conversation.”

COMMENTS ON AMBASSADOR HURLEY’S REPORT

Although Mr. Harriman was present during the conversation re-
ported in the foregoing communication, he departed for Washington
on consultation before the communication was sent. The Charge
d’Affaires in Moscow, George Kennan, sent a telegram dated April 23
to Mr. Harriman personally in Washington commenting in part as
follows :

“In view of your familiarity with the matter and the opportunity
that you now have for stating your own views to the Department I
am of course making no comment on my own to the Department
regarding the report of Ambassador Hurley nor did I make any to him
since your views were not known to me, but I do want to let you know
that it caused me some concern to see this report go forward. I refer
specifically to the statements which were attributed to Stalin to the
effect (1) that he expressed unqualified agreement with our policy in
China as Ambassador Hurley outlined it to him, (2) that this policy
would be supported by the Soviet Government and (3) that we would

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 97

have his complete support, in particular, for immediate action directed
toward the unification of the armed forces of China with full recog-
nition of the Chinese National Government under the leadership of
Generalissimo Chiang Kai-shek. . . .

“There was, of course, nothing in Ambassador Hurley’s account of
what he told Stalin to which Stalin could not honestly subscribe, it
being understood that to the Russians words mean different things
than they do to us. Stalin is of course prepared to affirm the principle
of unifying the armed forces of China. He knows that unification is
feasible in a practical sense only on conditions which are acceptable to
the Chinese Communist Party. . . .

“Actually I am persuaded that in the future Soviet policy respect-
ing China will continue what it has been in the recent past : a fluid
resilient policy directed at the achievement of maximum power with
minimum responsibility on portions of the Asiatic continent lying
beyond the Soviet border. This will involve the exertion of pressure
in various areas in direct proportion to their strategic importance and
their proximity to the Soviet frontier. I am sure that within the
framework of this policy Moscow will aim specifically at: (1) Reac-
quiring in substance, if not in form, all the diplomatic and territorial
assets previously possessed on the mainland of Asia by Russia under
the Czars. (2) Domination of the provinces of China in central Asia
contiguous to the Soviet frontier. Such action is dictated by the
strategic necessity of protecting in depth the industrial core of the
U.S.S.R. (3) Acquiring sufficient control in all areas of north China
now dominated by the Japanese to prevent other foreign powers from
repeating the Japanese incursion. This means, to the Russian mind,
the maximum possible exclusion of penetration in that area by outside
powers including America and Britain. . . .

“It would be tragic if our natural anxiety for the support of the
Soviet Union at this juncture, coupled with Stalin’s use of words which
mean all things to all people and his cautious affability, were to lead us
into an undue reliance on Soviet aid or even Soviet acquiescence in the
achievement of our long term objectives in China.”

On April 19, 1945, Ambassador Harriman discussed General Hur-
ley’s report with Mr. E. F. Stanton of the Office of Far Eastern Affairs
of the Department of State.

The memorandum of conversation indicated that Mr. Harriman
felt that General Hurley’s report, while factually accurate, gave a
“too optimistic impression of Marshal Stalin’s reactions.” Mr. Harri-
man was certain that Marshal Stalin would not cooperate indefinitely
with Chiang Kai-shek and that if and when Russia entered the conflict

98

U. S. RELATIONS WITH CHINA

in the Far East he would make full use of and would support the Chi-
nese Communists even to the extent of setting up a puppet government
in Manchuria and possibly in North China if Kuomintang-Communist
differences had not been resolved by that time. He indicated that he
had impressed on General Hurley the fact that statements made by
Stalin endorsing our efforts in China did not necessarily mean that the
Russians would not pursue whatever course of action seemed to them
best to serve their interests. Mr. Harriman feared that Ambassador
Hurley might give Chiang Kai-shek an “over-optimistic account of
his conversations with Stalin” and he thought it might be advisable
to suggest to General Hurley that he should be careful “not to arouse
unfounded expectations.” On April 23 Secretary Stettinius in-
structed Ambassador Hurley as follows :

“I attach great importance to Marshal Stalin’s endorsement at the
present time of our program for furthering the political and military
unity of China under Generalissimo Chiang Kai-shek. However, at
the same time I feel, as I have no doubt you do also, the necessity of
facing the probability that Marshal Stalin’s offer is given in direct
relation to circumstances that are existing now and that may not long
continue. The U.S.S.R. is at present preoccupied in Europe and the
basis for her position in Asia following the war is not yet affected
by the Communist-Kuomintang issue to an appreciable degree. In
view of these circumstances I can well appreciate the logic of Marshal
Stalin’s readiness to defer to our leadership and to support American
efforts directed toward military and political unification which could
scarcely fail to be acceptable to the U.S.S.R. If and w'hen the Soviet
Union begins to participate actively in the Far Eastern theater,
Chinese internal unity has not been established and the relative ad-
vantages of cooperation with one side or the other become a matter of
great practical concern to the future position of the Soviet Union in
Asia, it would be equally logical, I believe, to expect the U.S.S.R. to
reexamine Soviet policy and to revise its policy in accordance with its
best interests. Consequently I believe that it is of the utmost impor-
tance that when informing Generalissimo Chiang Kai-shek of the
statements made by Marshal Stalin you take special pains to convey
to him the general thought expressed in the preceding paragraph in
order that the urgency of the situation may be fully realized by him.
Please impress upon Generalissimo Chiang Kai-shek the necessity for
early military and political unification in order not only to bring about
the successful conclusion of the Japanese war but also to establish
a basis upon which relations between China and the Soviet Union may
eventually become one of mutual respect and permanent friendship.”

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 99

AMBASSADOR HURLEY’S REVIEW OF SOVIET-CHINESE
COMMUNIST RELATIONS

General Hurley following his return to Chungking, in a report dis-
cussing negotiations between the Chinese Government and the Chinese
Communist Party stated early in July 1945 :

“We are convinced that the influence of the Soviet will control the
action of the Chinese Communist Party. The Chinese Communists
do not believe that Stalin has agreed or will agree to support the
National Government of China under the leadership of Chiang Kai-
shek. The Chinese Communists still fully expect the Soviet to sup-
port the Chinese Communists against the National Government.
Nothing short of the Soviet’s public commitment will change the
Chinese Communists’ opinion on this subject. . . . Before the Yalta
Conference, 9a I suggested to President Roosevelt a plan to force the
National Government to make more liberal political concessions in
order to make possible a settlement with the Communists. The Presi-
dent did not approve the suggestion.

“I believe the Soviet’s attitude toward the Chinese Communists is
as I related it to the President in September last year and have re-
ported many times since. This is also borne out by Stalin’s state-
ment to Hopkins and Harriman. Notwithstanding all this the Chinese
Communists still believe that they have the support of the Soviet.
Nothing will change their opinion on this subject until a treaty has
been signed between the Soviet and China in which the Soviet agrees
to support the National Government. When the Chinese Communists
are convinced that the Soviet is not supporting them, they will settle
with the National Government if the National Government is realistic
enough to make generous political settlements. The negotiations
between the National Government and the Communist Party at this
time are merely marking time pending the result of the conference at
Moscow. 10

“The leadership of the Communist Party is intelligent. When the
handwriting is on the wall, they will be able to read. No amount of
argument will change their position. Their attitude will be changed
only by inexorable logic of evepts. The strength of the armed forces
of Chinese Communists has been exaggerated. The area of territory
controlled by the Communists has been exaggerated. The number of

9a See chapter IV.

0 This refers to the negotiations between T. V. Sooiig and Molotov in Moscow
which began early in July, and were continued intermittently throughout
July and August culminating in the signing of the Sino-Soviet Treaty of Friend-
ship and Alliance and related agreements in Moscow on Aug. 14, 1945. These
negotiations are discussed in chapter IV.

100

U. S. RELATIONS WITH CHINA

Chinese people who adhere to the Chinese Communist Party has been
exaggerated. State Department officials, Army officials, newspaper
and radio publicity have in a large measure accepted the Communist
leaders’ statements in regard to the military and political strength
of the Communist Party in China. Nevertheless, with the support of
the Soviet the Chinese Communists could bring about civil war in
China. Without the support of the Soviet the Chinese Communist
Party will eventually participate as a political party in the National
Government.”

V. FURTHER GOVERNMENT-COMMUNIST
NEGOTIATIONS

SIXTH KUOMINTANG CONGRESS, MAY 1945

The Sixth Plenary Session of the Kuomintang Congress was inaug-
urated in Chungking in May 1945. In commenting on the opening
address of the session by Generalissimo Chiang, the Ambassador noted
that the Generalissimo made no direct reference to the Communist
program although he obviously did nothing to close any door against
Communism. The Generalissimo had recently held two conferences
with the Ambassador on the subject of unification of all anti- Japanese
armed forces in China and had stated that while the situation was
not moving as rapidly as desired, progress with the Communists was
being made.

On May 17, 1945, the Kuomintang Congress passed a resolution
concerning the Chinese Communist problem. This resolution stated
that the Kuomintang had consistently striven for China’s freedom
and equality through national unity and the prosecution of the war,
while the Chinese Communist Party, despite its pledges of 1937, “had
persisted in armed insubordination.” The resolution pointed out
that with the convening of the National Assembly in sight it would
be possible to establish a constitutional government “in the not distant
future.” It was hoped that the Communists would not fail to appre-
ciate the difficulties confronting the nation and that an amicable
solution would be reached.

In another resolution adopted on May 16, 1945, the Kuomintang
Congress stated that China harbored no territorial ambitions; that all
China wanted was the preservation of its territorial and administra-
tive integrity and fair and equal treatment for all its nationals over-
seas ; that it was hoped that the five great powers would continue to
cooperate after the war ; that friendly cooperation between the Soviet
Union and China was especially necessary; that China would do

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 101

everything possible to ensure the success of the San Francisco Con-
ference; and that national unity and a constitutional government
were the cherished objectives of Kuomintang endeavor.

In a report to the Department, early in June, 1945, Ambassador
Hurley stated :

“In the view of the Chinese government the principal achievements
of the recently concluded Sixth Kuomintang Congress are as follows :

“1. All Kuomintang Party headquarters in the army will be abol-
ished within three months. Similar action will be taken in the
schools.

“2. Within six months local representation councils will be estab-
lished in all provinces and districts in free China on the basis of
popular elections.

“3. A law to give legal status to political parties will be promul-
gated and the government hopes that the Communist Party will
qualify thereunder. In this connection, the government has re-
iterated its intention to seek settlement of the Communist problem
through negotiations.

“4. Measures have been decided upon with a view to improving
the position of peasant farmers; reduction of renting; questions of
land tenure and land taxation.

“5. A decision to hold a national assembly was confirmed and it is
scheduled to convene on November 12, 1945.

“The question of membership in the National Assembly will be
referred to the People’s Political Council on which it is anticipated
that all parties will be represented.” 11

“General Hurley subsequently reported that the First Plenary Session of
the Fourth People’s Political Council convened in Chungking on July 7, 1945,
with 218 of 290 members present. The eight Communist members were not
present ; a few of the twelve Democratic League Members attended. He further
reported that on July 19 the Council adopted the following resolutions (as
published In the Central News Agency): “(1) The date for the convocation
of the National Assembly is to be left to the discretion of the government. (2)
The membership of the Assembly with due regard to the legal and practical
aspects of the issue and in accord with the opinions of the P. P. C. members
should provide the fullest possible representation of all classes of the people
In the country. (3) When a constitution is adopted, a constitutional govern-
ment shall be inaugurated. (4) Prior to the convocation of the Assembly,
the government should continue to improve all available political means for
obtaining national unity and solidarity, to insure freedom of opinion, of publica-
tion, of assembly, and of organized political societies and should enforce the
Habeas Corpus Act, recognize the legal status of various political parties and
cause the setting up of people’s representative organs in all provinces of
free China in order to lay a solid foundation for local self-government.”

102

U. S. RELATIONS WITH CHINA

THE COMMITrEE OF SEVEN

Late in June, the Ambassador reported that pursuant to measures
adopted by the Sixth Kuomintang Congress the Government had
appointed a committee of seven persons including members of the
Kuomintang and of the Democratic League and political independents
to negotiate with the Communists. The Ambassador said that the
Government thereupon sent a message to Mao Tse-tung, Chairman
of the Chinese Communist Party, and Chou En-lai, Vice Chairman,
offering to have this committee negotiate with representatives of the
Communist Party for a unification of the armed forces of China for
the purpose of defeating Japan. The Government had agreed to
the recognition of the Communists as a political party in China but
declined to recognize it as an armed belligerent or insurrection group.
The Communists did not immediately answer and put forth consider-
able propaganda including a “somewhat defiant” broadcast from
Yenan on June 20 saying among other things that the Chinese Com-
munist Party would not participate in either the People’s Political
Council meeting to be held in Chungking beginning July 7 or the
November Assembly. The Ambassador said that the Government had
just received a reply from Mao Tse-tung and Chou En-lai, indicating
that they would resume negotiations with the Government. Ambas-
sador Hurley added :

“Although the Communist Party of China had unquestionably been
endeavoring recently to bring about clashes between the Communist
troops and those of the Government (and has succeeded in causing
some clashes, the importance of which had been exaggerated in some
quarters), the logic of events seems to now be convincing the Com-
munists that their best interests as a political party may be served
by coming to an agreement with the National Government rather than
attempting to destroy it. The decision to resume negotiations does
not mean that the conflict has been solved. The end is not as yet in
sight but the situation seems definitely improved.”

The members of the committee referred to above called on the Am-
bassador on June 27, 1945, and informed him that the committee had
been formed to discuss the problem of unifying China, stating that
the three political independents had been appointed by the People’s
Political Council and that the others had volunteered their services.
They added that they had called upon the Ambassador to seek his
assistance and advice. The Ambassador replied that while he wished
to be helpful, the Chinese “should not ask a foreigner to make their
decisions for them.” His report of this meeting added:

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 103

“I suggested that the committee should go over all the proposals and
counter-proposals made by the Kuomintang and the Communists dur-
ing the past six months or so, and from them endeavor to evolve a
formula which might be acceptable to both sides. I believed that,
as American Ambassador, it would not be proper for me to express
an opinion on the merits of the Five-Point Communist Proposal or
the Three-Point Kuomintang Proposal. ... I said that, when the
committee had concluded its deliberations in Chungking, I would be
glad to provide a plane to take them to Yenan for discussions with the
Communists. I stated that if, when discussions were under way at
Yenan, both the Communists and others wished me to join in the con-
versations, I would be happy to do so. I urged that all Chinese taking
part in the deliberations and discussions should not do so as members
of the Kuomintang, Democratic League, Communist Party, or any
other party or group, but as patriotic Chinese who were endeavoring
earnestly to bring about a free, united, and democratic China.”

On June 28, 1945, General Wang Jo-fei, the ranking Chinese Com-
munist in Chungking at the time, called on the Ambassador. The
Counselor of the Embassy, who was. also present during the discussion,
made a summary of their conversation. The Ambassador recalled to
General Wang that he had been instrumental in obtaining the inclusion
of a Communist delegate in the Chinese Government delegation to the
San Francisco Conference. He recalled also that he had made a trip
to Yenan to confer with Mao Tse-tung and had brought Chou
En-lai and others to Chungking twice for the purpose of negotiating
with the Government for a settlement. The Ambassador said that he
had done more in an effort to bring about a just settlement between
the Communists and the Government than any other one man. He
said he had been presented in the Communist press in China and else-
where as being opposed to the Chinese Communists. The Ambassador
said that he realized that much of the abuse was coming from people
who were opposed to the National Government of China and did not
desire the unification of National and Communist armies in China.
He said that notwithstanding all these unjust and untrue accusations
he was the best friend the Chinese Communists had in Chungking.

The Ambassador recalled that he had assisted them in drafting
the Communist Five-Point Proposal. He had presented that pro-
posal to the Generalissimo. The Ambassador said that he believed
the press and other attacks on him constituted an attempt to keep the
Communists and the Kuomintang apart by persons who wished, for
their own selfish reasons, to prevent the creation of a free, united,
democratic and strong China. General Wang stated frankly that
real communism in China under present conditions was impossible.

104

U. S. RELATIONS WITH CHINA

The General stated, however, with perfect candor that the Party now
supported democratic principles but only as a stepping stone to a
future communistic state.

The Ambassador said that he had provided a plane to take the Com-
mittee of Seven and General Wang to Yenan on July 1; that the
committee had requested his assistance in the discussion, but that he
would not do so unless requested by the Communists. The Ambassa-
dor inquired whether the Communists would be willing to join a
steering committee to advise throughout the transition period
(remainder of the “period of tutelage” which would presumably end
with the adoption of a constitution by the National Assembly opening
on November 12) and suggested ways and means to improve the
Government. General Wang replied that this would depend on
whether the committee had real power ; if it were only to be a commit-
tee without real authority, then it would not be acceptable.

The Ambassador recalled that he had brought the Communist Five-
Point Proposal to Chungking where some Government officials had
told him that he had “been sold a bill of goods” by the Communists.
However, he felt that he was making progress in convincing the Gen-
eralissimo that the proposals were generally reasonable.

General Chou En-lai had asked that the four conditions he had
proposed on December 28, 1944, be met by the National Government as
conditions precedent to any agreement by the Communists on the
Five Points which they themselves had submitted through the Am-
bassador. The Ambassador remarked that the Government had
already withdrawn some sixty thousand troops from the north; there
was considerable freedom of speech and press (the Communist news-
paper was allowed to be published in Chungking) ; the secret police
were necessary in war time to deal with important security matters as
witness the FBI and England’s Scotland Yard. The Ambassador said
that if the Five-Point Proposal were agreed to, the Communists would
then be a part of the Government and would themselves take a hand in
the settlement of the questions included in the Four-Point Proposal
which Chou En-lai had sent to General Hurley on December 28, 1944.

General Wang believed that the Five-Point Proposal with some
alterations would still be acceptable to the Communists as a basis for
negotiations, indicating, however, that they would like to see the four
points accepted before agreeing on the five points. The Ambassador
told General Wang that he believed the Five-Point Proposal of the
Communists and the Three-Point Proposal of the Government con-
tained in themselves sufficient basis for an agreement between the
parties.

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 105

General Wang requested that, while the Committee of Seven was
engaged in conversations with the Communists at Yenan, the Ambas-
sador endeavor to persuade the Generalissimo to accept the Four-
Point Proposal as a condition precedent to further negotiations. The
Ambassador replied that for the reasons already stated, he could not
do so. Action on the four points should come after and not before
an agreement with the armed Communist Party. The Ambassador
stated frankly that nearly everyone familiar with the situation was of
the opinion that if the Generalissimo conceded the four points prior
to an agreement, the Communists would not enter into any agreement
at all.

The above-mentioned committee went to Yenan by air on July 1,
1945, and returned on July 5 bearing a document containing new Com-
munist proposals. According to Dr. Wang Shih-chieh, then Minister
of Information of the Chinese Government, these proposals covered
principally two main points: (1) that the National Chinese Govern-
ment call off the National Assembly scheduled for November 12, 1945,
and (2) that the Chinese Government summon a political conference
composed on a basis of equality of three members of the Kuomintang,
three members of the Chinese Communist Party and three members of
the Democratic League, with an additional three members to be chosen
from independent political parties or organizations. General Hurley’s
own opinion was that this was the Communists’ way of playing for
time awaiting the results of the Soong Conference at Moscow.

AMBASSADOR HURLEY’S DEPARTURE

Negotiations between the Communist representatives and the Na-
tional Government continued throughout August. Mao Tse-tung
accompanied by General Hurley who had gone to Yenan for this
purpose, arrived in Chungking on August 28, 1945, and remained for
about a month. The unexpected acceptance by Mao of the invitation
to visit Chungking may well have been precipitated in part by the
announcement of the Sino-Soviet Treaty of August 14, 1945, which
pledged Russian support of the National Government as the only
government of China. The Ambassador departed from Chungking
for consultation in the United States on September 22, 1945, and
arrived in Washington four days later. Shortly before his departure
he submitted the following report regarding the negotiations then
being conducted in Chungking between the National Government and
Communist representatives :

“(1) The negotiators have agreed that they will collaborate for the
establishment of a democratic government in China for the reconstruc-
tion of China and the prevention of civil war.

106

U. S. RELATIONS WITH CHINA

“(2) Both have agreed to support the leadership of Chiang Kai-
shek as President of the Republic.

“(3) They have further agreed that both parties will support the
doctrines of Sun Yat-sen and will cooperate for the establishment in
China of a strong, democratic government.

“(4) The Communists have agreed that they will recognize the
Kuomintang as the dominant party in control of the government and
will cooperate with that party during the period of transition from
the present form of government to a democratic regime.

“(5) Numerous other questions, including the release of political
prisoners, freedom of person, speech, press, belief, assembly and asso-
ciation were agreed upon.

“There are two important points on which the conferees are not yet
in agreement, although both parties have made concessions toward
making agreement possible. One point is that the Communists claim
the right to appoint, select, or elect any Communist governors or
mayors in certain provinces. The Government contends that until a
constitution has been adopted and a democratic government inaug-
urated the prerogative of appointing governors and officials is vested
in the President of the Republic. . . . The Government considers
that this should not be changed until the transitory period from the
present government to a constitutional government has been achieved.
Both parties agree to work together during the transitional period.
The next point on which the parties have approached an agreement but
have not finally agreed is the number of Communist troops that are to
be included in the National peace-time army of China. The Commu-
nists first contended that they should have 48 Communist divisions.
It was pointed out by the Government that the present plan calls for
a peace-time army consisting of 80 to 100 divisions, and that the Com-
munists, who the Nationalists claim are in minority, are claiming the
right to approximately one-half of the peace-time army. . . . This,
the Nationalists refuse to agree to, but they have offered the Commu-
nists 20 divisions, or what will constitute approximately one-fifth of
the planned peace-time army. Chairman Mao Tse-tung said that they
did not reject the offer but that the Communists wanted to give it
further consideration.

“The overall achievement in this conference has been to keep the
Communists and the Nationalists talking peace-time cooperation dur-
ing the period for which civil war has been predicted by nearly all
the elements who are supporting a policy to keep China divided against
herself. The conferences will continue. Mao Tse-tung is remaining
in Chungking. The Generalissimo had given Mao his word and
pledged his character for the safe conduct of Mao and his* party. He

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 107

has agreed to give Mao and his party transportation to Yenan at any
time they wish to discontinue the conferences.

“I told the Communists and Government negotiators last night that
in my opinion they were attempting to settle too many details. ... I
said that if they could agree on basic overall principles, details could
be worked out in accordance with such principles.

“The spirit between the negotiators is good. The rapprochement
between the two leading parties of China seems to be progressing, and
the discussion and rumors of civil war recede as the conference
continues.”

The Embassy at Chungking reported that the Ambassador had de-
layed his departure from September 18 to September 22, to remain in
China an additional four days upon the earnest request of both the
Chinese Communist representatives and the Chinese Government ne-
gotiators “to render assistance in reaching agreement.” The Embassy
added “for the Department’s information, both parties have expressed
deep appreciation of the cooperation and assistance of the Ambassador.
They have agreed upon a paragraph to be included in their proposed
final resolution thanking the Ambassador for his great services to
China in bringing about the conference and in his general helpfulness
as mediator during the negotiations.” In a letter to President Truman
dated September 17, 1945, President Chiang stated that “General
Hurley’s wise statesmanship and human qualities have won the respect
and affection of the Chinese people who see in him a fitting symbol of
American foreign policy of fair-play and justice. I have talked with
General Hurley at length and with perfect frankness regarding the
policy of my government on various questions, and have asked him to
acquaint you, Mr. President, with the various aspects which have
a bearing on the implementation of continued close collaboration be-
tween China and the United States in the maintenance of peace and
order in the Far East.”

CONTINUING NEGOTIATIONS AT CHUNGKING

Negotiations continued in Chungking between the Chinese Com-
munists and the National Government following the departure of the
Ambassador. Early in October, Dr. K. C. Wu, the Minister of Infor-
mation of the Chinese Government, requested the Embassy at Chung-
king to convey the following message to General Hurley :

“The Chinese Communists have agreed to accept the proposal by
the National Government that they be allotted 20 divisions in the
National Army. A military commission will decide how soon the
forces of the Chinese Communists can be organized into 20 divisions.

108

U. S. RELATIONS WITH CHINA

The Chinese Communists will be represented on this commission by
the Chief of Staff, General Yeh Chien-ying and certain other officers
designated by him. The National Government will be represented by
General Lin Wei-wen, Vice Minister of War, and General Liu Pei,
Vice Minister of Military Operations.

“Furthermore, agreement has been reached that prior to the estab-
lishment of a constitutional government the National Government will
organize a political council of 37 members. This council will represent
independents and all parties. The council will consider and make
recommendations regarding (1) a draft constitution for submission
to a people’s congress, (2) whether a people’s congress should be con-
vened on November 12 as planned or postponed to a later date, and
(3) a policy for peaceful reconstruction.

“The Chinese Communists proposed that the council adopt a ‘system
of absolute veto’. The representatives of the National Government
have not yet agreed to this proviso which would mean that all pro-
posals would have to receive unanimous approval before they became
effective.

“Discussions of the political council shall be open to the public
and not secret. Decisions adopted by it shall be final and conclusive.
Resolutions which are adopted by it shall be carried out in accordance
with due process of law by the National Government.”

Mao Tse-tung returned to Yenan by plane on October 11, 1945.
Just prior to his departure, General Chou En-lai discussed the progress
of negotiations with a member of the staff of the American Embassy.
From this conversation it appeared that a joint Government-Com-
munist statement, which would probably be made public on the day
of Mao’s departure for Yenan, was being prepared. The points of
agreement were set forth in an official statement issued on October 11.
Chou said that the only principal point remaining on which some sort
of agreement had not been reached was the question of the government
of liberated areas which were then under control of the Chinese Com-
munists; in particular he mentioned the provinces of Hopei, Shan-
tung, and Chahar. According to Chou the Chinese Communist Party
desired that the governors of the liberated areas be appointed by a
council which would be elected from districts and villages. He added
that the Government was agreeable to elections in the districts and
villages but insisted that the Central Government appoint directly
provincial governors. In the opinion of the Embassy the two sides
were far from agreement on the basic question of political control in
the liberated areas now dominated by the Chinese Communists. On
October 11 the Government released the text of the agreement with the

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 109

Communists. 12 The important feature of this agreement was that it
called for the convening of the Political Consultation Conference for
the implementation of the agreed general principles. General Mar-
shall was later to assist in this effort.

In mid-October 1945 the Embassy at Chungking reported that it
had been informed that Wang Jo-Fei had returned from Yenan, that
Governor Chang Chun of Szechwan would arrive in Chungking in a
few days and that upon his arrival he, together with Dr. Wang Shih-
chieh, then Minister of Foreign Affairs, and Shao Li-tze, Secretary
General of the People’s Political Council, would represent the Chinese
Government in renewed conversations with the Communists, Chou
En-lai and Wang Jo-Fei. The conversations would cover matters
relating to the following subjects: (1) the Political Consultative
Council; (2) liberated areas; and (3) the National Assembly. It
was expected that the conversations would last for about ten days.
Upon conclusion of the conversations Chou En-lai would carry back
the proposals to Yenan for decision by the Chinese Communist au-
thorities. The Chinese Communist authorities would then appoint
delegates who would come to Chungking to attend the Political Con-
sultative Conference, which it was anticipated would be held early in
November. It had been decided that General Yeh Chien-ying, Chief
of Staff of the 18th Army Group, would come to Chungking with the
Communist delegates, probably as a delegate himself and also to serve
as a Communist member of the subcommittee of three to discuss
military questions. The Embassy at Chungking felt that the Com-
munist representative was “definitely much more optimistic” than
he had previously been with respect to the likelihood of an eventual
agreement between the Central Government and the Communists, and
had expressed great satisfaction over the announcement in the press
that Ambassador Hurley would shortly return to China.

Although a published statement issued by Dr. K. C. Wu, the
Chinese Minister of Information, on October 27 indicated that the
Government-Communist conversations were “progressing in a cor-
dial atmosphere,” Wang Ping-nan, a Communist representative at
Chungking, informed the Embassy that recent negotiations had made
no progress. He expressed the opinion that the Government appar-
ently intended to play for time while securing military control over
areas liberated by the Communists, and he voiced the Communist re-
sentment of what he termed “American intervention” in landing troops
at many points in North China to hold them pending the arrival of
Government troops, large elements of which had been flown north by
the United States Air Force. 13 According to the Embassy, he at first

12 See annex 49.

a For an account of military operations in 1945 see chapter VII.

110

U. S. RELATIONS WITH CHINA

parried a query in regard to the Manchurian situation but afterwards
said there were in that area a few Eighth Route Army personnel.
In the main, he said, there had been a rising up of the common people.
He expressed the view that the U.S.S.R. would not interfere in in-
ternal conflicts in China, preferring to let the Chinese work out their
own problems unless the United States should give active aid to the
Kuomintang, in which event the U. S. S. R. might find some action
necessary.

CLASHES BETWEEN COMMUNIST AND NATIONAL TROOPS

On November 4, the Embassy at Chungking reported that in the
opinion of the Military Attache the threat of widespread civil war
in China seemed to be growing. The Embassy pointed out that the
gravity of the situation was demonstrated by the postponement of the
convocation in Chungking of the newly organized Political Consulta-
tive Conference in deference to discussions between the National Gov-
ernment and the Communists regarding a military truce. The princi-
pal weapon of the Communists in their efforts to prevent the Central
Government from occupying areas dominated by them was the ef-
fectiveness of Communist troops against the railroads in those areas.
The Embassy had learned that the Communists had offered to refrain
from attacking lines of communication only if the Government prom-
ised to stop the movement of Government troops into North China.
Since the Government had flatly refused so to do, the Embassy felt
that the situation seemed “almost hopeless.”

POSTPONEMENT OF THE POLITICAL CONSULTATIVE
CONFERENCE

On November 10, 1945, Dr. K. C. Wu informed the Embassy in
Chungking that on October 30 the Government had made the follow-
ing six proposals in writing to the Communists :

“(1) Both sides to give orders to their troops to remain wherever
they are and not to attack the other side ; (2) the Communists to with-
draw their troops from places along railways which they have been
raiding and the Government will undertake not to send troops to those
places — these sections to be guarded entirely by railway police; (3) a
communications supervisory committee to be organized by the People’s
Political Council with members of the People’s Political Council as
well as other disinterested representatives from the various concerned
localities to carry out inspections along the railway lines and report
their findings about the situation ; (4) in case the Government finds it
necessary to move troops along the Peiping-Suiyuan Railroad, the
Tatung-Puchow, the Tsingtao-Tsinan, the northern section of the

AMBASSADORSHIP OF MAJOR GENERAL PATRICK J. HURLEY 111

Pinghan Railroad, the eastern section of the Lunghai Railroad and the
northern section of the Tientsin-Pukow, the Government will consult
the Communists first in order to reach agreement; (5) both sides
should endeavor earnestly within one month to reach a fundamental
arrangement about reorganization of Communist troops and the allot-
ment of places where they will be stationed ; (6) the proposed People’s
Consultative Council should be convened at once.” In connection with
the last point, Dr. Wu said that everyone but the Communists had
already named delegates to the Political Consultative Conference,
which would consist of 8 Government, 7 Communist, 13 Third Party,
and 9 non-partisan members.

Dr. Wu stated that the Communists had not replied until November
8 and that their reply took the form of counter-proposals which were
highly unsatisfactory to the National Government.

The Political Consultative Conference scheduled to meet on Novem-
ber 20 failed to convene with resulting increased pessimism in Chung-
king regarding further negotiations. On November 25, General Chou
En-lai departed from Chungking for Yenan and on the following
day Wang Ping-nan followed him. On November 27, a provisional
list of delegates to the Political Consultative Conference was finally
released to the press.

On December 1, Wang Ping-nan returned to Chungking; on De-
cember 3, he called at the Embassy at Chungking and said that the
Chinese Communist leaders had definitely decided to participate in
the Political Consultative Conference and that five of the seven Com-
munist delegates had been selected. He said that the remaining two
would be selected and the group would fly to Chungking for a meeting
to be held possibly about December 10. He would not venture an opin-
ion as to the outcome of the Conference but admitted the great im-
portance of the meeting to the future of China. In this connection, he
said that future developments in China depended even to a greater ex-
tent, however, on American policy toward China and that therefore the
Communists were eagerly awaiting the arrival of General Marshall and
an expected clarification of the American position. 14 The Embassy
at Chungking reported that during this conversion “Wang made a
particular point of stating that Soviet policy is one thing but that
Chinese Communist policy is their own and independent of the Soviet
policy. In an apparent effort to counter recent charges in the Chinese
Government press, he emphasized that the Chinese Communists are
particularly desirous of maintaining cordial relations with the United

14 On Nov. 27, 1945, President Truman announced the appointment of General
Marshall as his Special Representative in China. For an account of General
Marshall’s mission, see chapter V.

112

U. S. RELATIONS WITH CHINA

States, recognizing that China must have American assistance in the
postwar period.” The Communist representatives to the Political
Consultative Conference failed, however, to arrive in Chungking until
December 17 with resulting delay in the convocation of the Conference.

VI. THE RESIGNATION OF AMBASSADOR

HURLEY

Meanwhile, Ambassador Hurley had submitted his resignation in a
letter to the President, dated November 26, and his resignation had been
accepted by the President in a letter of the following day. 10 The post
remained vacant until the appointment of Ambassador Stuart on
July 11, 1946.

18 For text of General Hurley’s letter, see annex 50. On December 7, 1945, Sec-
retary of State Byrnes answered in a public hearing before the Senate Foreign
Relations Committee the charges against certain officers of the Department of
State which General Hurley had raised in his letter of resignation and which he
had amplified before the same committee on December 5 and 6.

CHAPTER IV

The Yalta Agreement and the Sino- Soviet
Treaty of 1945

I. THE YALTA AGREEMENT, FEBRUARY 11, 1945

TEXT OF THE AGREEMENT

On behalf of the United States, Great Britain and the U.S.S.R. on
February 11, 1945, Roosevelt, Churchill and Stalin signed at Yalta an
agreement containing the political conditions upon which the Soviet
Union would enter the war against Japan. 1 This agreement reads as
follows :

“The leaders of the three Great Powers — the Soviet Union, the
United States of America and Great Britain — have agreed that in two
or three months after Germany has surrendered and the war in Europe
has terminated the Soviet Union shall enter into the war against Japan
on the side of the Allies on condition that :

“1. The status quo in Outer-Mongolia (The Mongolian People’s
Republic) shall be preserved ; 2

“2. The former rights of Russia violated by the treacherous attack
of Japan in 1904 shall be restored, viz :

“(a) the southern part of Sakhalin as well as all the islands
adjacent to it shall be returned to the Soviet Union,

1 As background to the Yalta Agreement, see chapter I concerning the Cairo
Declaration and chapter II on the conversations of Vice President Henry A.
Wallace with Generalissimo Chiang Kai-shek in Chungking during June 1944,
in which the latter requested the assistance of the United States in bringing
about an improvement in Sino-Soviet relations. A summary of these conver-
sations, prepared by a member of the Vice Presidential party, is published as
annex 43. At the first formal meeting of the Tehran Conference Marshal Stalin
declared that the Soviet Union would enter the war against Japan “once Ger-
many was finaUy defeated.” The question of making Dairen a “free port under
international guaranty” and Soviet use of the Manchurian railways were dis-
cussed informally during the Tehran Conference.

a The Soviet Union as a result of the insertion of “(The Mongolian People’s
Republic)” later claimed this provision meant independence. The Chinese posi-
tion was based on the Sino-Soviet Treaty of 1924 which had recognized Chinese
sovereignty in Outer Mongolia. For the outcome of the discussion on this point
see p. 117.

113

114

U. S. RELATIONS WITH CHINA

“(b) the commercial port of Dairen shall be internationalized,
the preeminent interests of the Soviet Union in this port being
safeguarded * * 3 and the lease of Port Arthur as a naval base of the
U.S.S.R. restored , 4

“(c) the Chinese-Eastern Railroad and the South-Manchurian
Railroad which provides an outlet to Dairen shall be jointly oper-
ated by the establishment of a joint Soviet-Chinese Company it
being understood that the preeminent interests of the Soviet Union
shall be safeguarded 5 * * 8 and that China shall retain full sovereignty
in Manchuria ;

“3. The Kurile islands shall be handed over to the Soviet Union.

“It is understood, that the agreement concerning Outer-Mongolia
and the ports and railroads referred to above will require concurrence
of Generalissimo Chiang Kai-shek. The President will take measures
in order to obtain this concurrence on advice from Marshal Stalin.

“The Heads of the three Great Powers have agreed that these claims
of the Soviet Union shall be unquestionably fulfilled after Japan has
been defeated.

“For its part the Soviet Union expresses its readiness to conclude
with the National Government of China a pact of friendship and
alliance between the U.S.S.R. and China in order to render assistance
to China with its armed forces for the purpose of liberating China
from the Japanese yoke.”

DISCUSSIONS AT YALTA

From the available evidence, it is clear that the primary motivation
of the Yalta Agreement was military. This aspect is indicated by the
fact that Mr. Stettinius, then Secretary of State, was informed by
President Roosevelt that since this was predominantly a military mat-
ter he (the President) and Mr. Harriman would handle the negotia-

* A controversy was later to arise over this wording, the origin and authorship
of which are still obscure. Mr. Harriman, the American Ambassador at Moscow,

who was a participant in the discussions, subsequently stated that “there is no
reason from the discussions leading up to the Yalta agreements to presume that
the safeguarding of the ‘preeminent interests of the Soviet Union’ should go
beyond Soviet interests in the free transit of exports and imports to and from

[sic] the Soviet Union. . . .” (Italics in the original.)

4 Mr. Harriman has commented on this provision as follows: “I believe Presi-

dent Roosevelt looked upon the lease of Port Arthur for a naval base as an

arrangement similar to privileges which the United States has negotiated with

other countries for the mutual security of two friendly nations.”

8 As regards this provision Mr. Harriman has also stated his conviction that
President Roosevelt had in mind only transit traffic and not any general Russian
interest in Manchuria.

YALTA AGREEMENT AND SINO-SOVIET TREATY OF 194 5 115

tions. Mr. Harriman has subsequently stated that Admiral King
was aware of the projected arrangements and considered them the
most important outcome of the Yalta Conference.

In a conversation between President Roosevelt and Marshal Stalin
on Far Eastern matters during the Yalta Conference, the latter
brought up the subject of the political conditions upon which the
Soviet Union would enter the war against Japan. In the course of
the conversation Marshal Stalin indicated that the political condi-
tions would have to be met because Soviet entry into the Pacific war
“would have to be justified to Russian ‘public opinion.’ ”

In general terms the Russian conditions were conceded. It should
be remembered that at this time the atomic bomb was anything but
an assured reality ; the potentialities of the Japanese Kwantung Army
in Manchuria seemed large; and the price in American lives in the
military campaign up the island ladder to the J apanese home islands
was assuming ghastly proportions. Obviously military necessity
dictated that Russia enter the war against Japan prior to the mount-
ing of Operation Olympic (the assault upon Kyushu) , roughly sched-
uled for November 1, 1945, in order to contain Japanese forces in
Manchuria and prevent their transfer to the Japanese home islands.

There was historical precedent for the specific provisions of the
Yalta Agreement, and the subsequent Sino-Soviet Treaty and related
agreements of 1945 provided adequate legal guarantees. It was, how-
ever, unfortunate that China was not previously consulted. Presi-
dent Roosevelt and Marshal Stalin, however, based this reticence on
the already well-known and growing danger of “leaks” to the Jap-
anese from Chinese sources due to the debilitating and suppurative
effects of the war. Here again military exigency was the governing
consideration. At no point did President Roosevelt consider that he
was compromising vital Chinese interests.

SOVIET VIEWS ON THE AGREEMENT

At the end of May 1945 Harry Hopkins, at the request of President
Truman, visited Moscow. Among other topics he discussed the Far
Eastern situation. During the discussions Marshal Stalin stated that
the reconstruction of China would depend largely on the United
States since Russia would be preoccupied with its own reconstruction ;
that he proposed no alteration over the sovereignty of Manchuria or
any other part of China, either Sinkiang or elsewhere ; that the Soviet
system was not in existence in Mongolia ; that Generalissimo Chiang
Kai-shek was the only Chinese leader qualified to undertake the unifi-
cation of China ; that the Chinese Communist leaders were not as good
or as well qualified to undertake the task ; and that he would welcome

116

U. S. RELATIONS WITH CHINA

Chinese civilian participation in the administrative taking over of
Manchuria.

President Truman in Washington on June 14 repeated the fore-
going to Dr. T. V. Soong, then Premier and Foreign Minister of China,
who expressed his gratification. Dr. Soong pointed out that, even
though the Yalta Agreement referred to the re-establishment of Rus-
sian rights lost in the Russo-Japanese War of 1904, by the Sino-
Soviet Treaty and related agreements of May 31, 1924 and the Agree-
ment of September 20, 1924, with Chang Tso-lin, then war lord of
Manchuria, Russia had renounced special concessions including extra-
territoriality. He said that these points would have to be clarified.

On June 15, 1945, Ambassador Hurley informed Generalissimo
Chiang Kai-shek of the provisions of the Yalta Agreement pursuant
to instructions from the President of June 9, 1945. At the same time
the Ambassador communicated to the Generalissimo Marshal Stalin’s
categorical assurances regarding Chinese sovereignty in Manchuria
and his oral concurrence to the principle of the Open Door in China,
both of which Stalin had given to the President via Harry Hopkins,
who had been on special mission to Moscow in May- June 1945. From
the Generalissimo’s reaction it was apparent that the Russians had
already made the Yalta Agreement known to him.

II. THE SINO-SOVIET TREATY OF FRIENDSHIP
AND ALLIANCE, AUGUST 14, 1945

NEGOTIATION OF THE TREATY

Sino-Soviet negotiations between Dr. T. V. Soong and Marshal
Stalin and Foreign Minister Molotov began in Moscow during the
first week in July 1945. Following their interruption by the Berlin
Conference, negotiations were resumed in August with Dr. Wang
Shi-chieh, the new Chinese Foreign Minister, replacing Dr. Soong as
chief Chinese plenipotentiary. Dr. Soong, however, assisted Dr.
Wang in the August negotiations. At the outset the United States
informed the participants that it expected to be consulted prior to
the signature of any Sino-Soviet agreement, in view of its role
at Yalta. The American position was that the Yalta Agreement
should be complied with — no more, no less.

Difficulties over the interpretation of the provisions of the Yalta
Agreement arose from the very beginning, with the Soviet Union
interpreting the agreement to suit its own purposes. As the Soviet
interpretation of the Yalta Agreement became increasingly apparent,
the United States finally felt compelled to inform both parties that
certain Soviet proposals exceeded the Yalta provisions. At the be-

YALTA AGREEMENT AND SINO-SOVIET TREATY OF 19 45 117

ginning of the negotiations the Soviet Union asked (1) for a con-
trolling Soviet interest in the Chinese Eastern and South Manchurian
Railways; (2) that the boundaries of the Dairen and Port Arthur
leases be those of the Kwantung Peninsula lease prior to the Russo-
Japanese War of 1904; and (3) the recognition of the independence of
Outer Mongolia. The Chinese believed, and the United States agreed,
that these proposals exceeded the provisions of the Yalta Agreement.
Secretary of State Byrnes, with the approval of the President, then
advised the Chinese Government against making any concessions
beyond the terms of the Yalta Agreement. On August 10, 1945, Mr.
Harriman, acting on instructions, informed Dr. Soong as a matter
of record that the United States Government considered that the
proposals which he had already made fulfilled the Yalta Agreement
and that any further concessions would be with the understanding
that they were made by the Chinese Government because of the value
it attached to obtaining Soviet support in other directions. Mr.
Harriman reported that Dr. Soong “thoroughly understood and
accepted the correctness of this position.”

A Treaty of Friendship and Alliance between the Republic of China
and the U.S.S.R. was signed on August 14, 1945. At the same time
notes were exchanged and agreements signed on various individual
and related matters. 6 The Treaty pledged mutual respect for their
respective sovereignties and mutual noninterference in their respective
internal affairs. In the exchange of notes the Soviet Union promised
to give moral support and military aid entirely to the “National Gov-
ernment as the central government of China” and recognized Chinese
sovereignty in Manchuria ; and China agreed to recognize the indepen-
dence of Outer Mongolia if a plebiscite after the defeat of Japan con-
firmed that that was the desire of the Outer Mongolian people. 7 The
agreement on Dairen committed China to declare Dairen a free port
“open to the commerce and shipping of all nations” and provided for
Chinese administration of the port; but it exceeded Yalta by granting
the Soviet Union a lease of half of the port facilities, free of charge.
This agreement has not been put into effect, since Nationalist military
and civil officials have been prevented from functioning in the Kwan-

8 For fuU texts see annexes 51-59.

7 One of the main preoccupations of Dr. Soong during the negotiations was to
secure Soviet recognition of Chinese sovereignty in Outer Mongolia, even though
this had in fact ceased to exist many years before. The Soviet Union had been the
controlling de facto force there since the middle 1920*8 despite the Sino-Soviet
Treaty of 1924. (See footnote 2 to this chapter.) Dr. Soong was apparently
willing to agree to other significant and important concessions in return for Outer
MongoUa and it was with some diflSculty that he was persuaded by Mr. Harriman
to accept substance in place of form.

118

U. S. RELATIONS WITH CHINA

tung Peninsula area because of the attitude of the Russians and the
Chinese Communists. The agreement on Port Arthur provided for
the joint use of the area as a naval base by the two Powers and extended
the boundary of that area farther than the United States expected,
though not to the pre-1904 boundary which the U.S.S.R. would have
preferred. The railway agreement provided for joint ownership and
operation of the Chinese Eastern and South Manchurian Railways.
The Treaty and the agreements regarding Dairen, Port Arthur, and
the railroads were to run for thirty years. 8

ASSURANCES ON THE OPEN DOOR

On July 28 in Berlin Mr. Harriman, in a memorandum to Secretary
Byrnes, had pointed out that since the United States Government had
taken the initiative in inducing China to discuss matters of mutual
interest with the Soviet Union, it was incumbent upon the United
States to obtain recognition of the principle of the Open Door policy
in Manchuria and to make certain that the resulting Sino-Soviet ar-
rangements did not have the effect of giving the Soviet Union special
advantages over American and other foreign commerce with Man-
churia, or of shutting out foreign trade from that part of China. He
therefore recommended that the Soviet Union be requested to give
written assurances of support for the Open Door policy. This sugges-
tion was approved by the Department of State on August 5, 1945.
On August 14, however, Mr. Harriman reported that, according to
Mr. Molotov, Generalissimo Stalin did not believe there was then
any need for a public statement on the Open Door, “especially as he
had given his assurances that the Open-Door Policy would be
maintained.”

The Department on August 22 instructed the Ambassador in Moscow
as follows :

“1. The President desires that you arrange to see Stalin or, if this
proves impracticable, Molotov, as soon as possible and present to him
our views as given below regarding the issuance of a statement affirm-
ing respect for the Open-Door policy in connection with the Soong-
Stalin agreements.

“2. The oral assurances given by Stalin, as you have indicated to
Molotov, are satisfactory to the President. However, you should ex-
plain clearly and forcefully the situation in this country where public
opinion and public reaction to events of concern to the United States

8 About Aug. 10, 1945, Dr. Soong told Mr. Harriman that agreement had been
reached on all outstanding points. Mr. Harriman reported that Dr. Soong was
“very grateful for our support and is convinced that unless we had taken an active
part in the negotiations he would have had to concede to all Stalin’s demands.”

YALTA AGREEMENT AND SINO-SOVIET TREATY OF 1945 119

have great weight and where the public expects and is entitled to be
given as full a knowledge as practicable on foreign affairs which may
affect the interests of this country. It follows, therefore, that the oral
assurances by Stalin do not meet the situation. You may also em-
phasize the deep interest which the American public has in Far
Eastern events and particularly in developments pertaining to China,
including Manchuria. In reply to Molotov’s assertion that the agree-
ments would make it clear that no restriction would be imposed on
foreign commerce, you may state that in so far as the agreements might
fail to give assurances regarding full equality of opportunity and
freedom from any form of discrimination they would fall short of
what we would consider satisfactory. In reply to his point that no
such statement had been foreseen at Yalta, you may say that we do
not consider it reasonable that, simply because at Yalta the desirability
of such assurances was not mentioned, we are therefore not entitled
to request these assurances.

“3. With regard to the manner in which Stalin’s assurances might
be given public form, we suggest and would prefer that the Soviet
and Chinese governments issue a statement, at the time of the publica-
tion of the agreements, affirming adherence to the policy of the Open-
Door, equality of opportunity and non-discrimination in matters re-
lating to the management and operation of the railways and the free
port of Dairen. We do not insist upon the particular language of the
suggested statement as communicated by you to Stalin, but we do feel
that any statement issued should give in clear and unequivocal terms
the assurances we have requested and which Stalin had agreed to give.

“4. We understand that the Chinese are prepared to issue such a
statement and you are authorized to urge on Stalin the desirability of
a similar statement by the Soviet Government.”

Mr. Harriman on August 27 delivered this message to Stalin, who
agreed that the Soviet Union would make a public statement express-
ing support of the Open Door policy in China, including Manchuria,
equal opportunity for trade and commerce, and freedom from dis-
crimination for all free countries. Mr. Harriman assured General-
issimo Stalin that the Chinese Government would make a similar state-
ment after Stalin expressed a preference for separate statements in
lieu of a joint Sino-Soviet one. In the same conversation Stalin said
that he expected the National Government to send Chinese troops to
Manchuria in the near future to take over from the Russians. He
added that the Russian Army had as yet found no Chinese Communist
guerrilla units in Manchuria and that he believed the National Gov-
ernment and the Chinese Communists would reach agreement, since
it was in the interests of both sides to do so.

120

U. S. RELATIONS WITH CHINA

In a conversation on August 31 the Minister-Counselor of the Ameri-
can Embassy discussed the proposed statement with the Chief of the
American Section of the Soviet Foreign Office. The latter seemed
to be under the impression that the United States had in mind a state-
ment concerning China in general. The Minister emphasized, how-
ever, that the United States was concerned with Manchuria since the
statement was intended to relate to the Sino-Soviet arrangements
regarding the Russian position in that area.

On September 6 General Hurley informed the Department that
the suggestions for a statement had been made at a time when the
attitude of the Soviet Union toward the National Government of
China had not been publicly and officially stated. The Ambassador
believed that publication of the Sino-Soviet Treaty and related agree-
ments had altered the situation : “The publication of these documents
has demonstrated conclusively that the Soviet Government supports
the National Government of China and also that the two governments
are in agreement regarding Manchuria.”

In mid-September Mr. Harriman reported a conversation a few
days earlier between the Chinese Ambassador in Moscow and Andrei
Vyshinsky, Soviet Deputy Foreign Minister, in which the latter had
asked for a draft of the proposed statement by the Chinese Govern-
ment. The Chinese Ambassador added that Dr. Soong was most
anxious to have the statement issued but that when he (the Chinese
Ambassador) had informed Chungking of the request from Vyshinsky
he had been informed that the question had been referred to Dr. Wang
Shih-chieh, the Chinese Foreign Minister, who was then in London
attending the First Session of the Council of Foreign Ministers. In
the end, however, the Chinese Government seemingly took the posi-
tion that the Sino-Soviet Treaty constituted a sufficient guarantee,
since it did not again raise the question. The Soviet Union, which
from the beginning had been reluctant, also seems to have allowed the
question to lapse.

CHINESE REACTION TO THE TREATY

On August 16, 1945, Generalissimo Chiang Kai-shek informed
Ambassador Hurley that agreement had been reached with the Soviet
Union and that he was “generally satisfied with the treaty.” In re-
porting this conversation to the Department Ambassador Hurley
added that his reports “showed the Generalissimo has always doubted
the Soviet’s position in regard to relations with the Chinese Com-
munists. Yesterday he thanked me for the basis that I had helped
him to lay for rapprochement with the Soviets. He admitted that
the Sino-Soviet treaty indicates (1.) an intention on the part of the

YALTA AGREEMENT AND SINO-SOVIET TREATY OF 1945 121

Soviets to assist in bringing about unification of the armed forces
in China; (2) an intention to support Chinese efforts to create a
strong, unified and democratic government; and (3) an intention
to support the National Government of China.” In conclusion,
General Hurley said that “Chiang Kai-shek will now have an oppor-
tunity to show realistic and genuine leadership. He will have an
opportunity to show his qualifications for leadership of the Chinese
people in peace as well as in war. I am with the Generalissimo fre-
quently. I insist continuously that the Chinese people must be
responsible for their own policies, select their own leadership, and
make their own decisions.”

In a conversation of August 21 with Ambassador Hurley the
Chinese Foreign Minister, Dr. Wang Shih-chieh, who had just returned
to Chungking, “expressed himself as being satisfied with the results
and said that proceedings would commence at once for the approval of
the treaty and the notes exchanged between the Soviet and Chinese
Governments.”

On August 29, Madame Chiang Kai-shek, who was then in the
United States, called on the President. She complimented him on
the results of the Sino-Soviet conversations and expressed apprecia-
tion to the United States Government for the assistance which it had
given to the Chinese plenipotentiaries in working out these agree-
ments. The President said that that had been one of his principal
objectives in going to Berlin and that he felt strongly that China
should be supported in working out the arrangements which had been
initiated by President Roosevelt.

Despite criticism of the Sino-Soviet arrangements of August 14,
1945, and as indicative of the* value which the Chinese Government
attached to them, Dr. Wang Shih-chieh as late as September 14, 1947,
in a conversation with General Marshall, then Secretary of State, con-
cerning the question of the veto power as applied to the J apanese peace
treaty, expressed his opposition to the elimination of the veto power
because of his fears that the Soviet Union “would interpret this, for
its own convenience, as virtually cancelling the Sino-Soviet Treaty.”
The Foreign Minister was concerned at the reaction this would have
on the situation in China.

Editorial comment in both Nationalist and Chinese Communist
territory expressed approval of the Sino-Soviet Treaty and related
agreements at the time they were made public.

UNITED STATES REACTION TO THE TREATY

At the time that the Sino-Soviet Treaty and related agreements
were made public the United States supported the arrangements. In

122

U. S. RELATIONS WITH CHINA

a statement issued on August 27, 1945, Secretary Byrnes said that he
believed that the treaty and accompanying agreements constituted an
‘‘important step forward in the relations between China and the
Soviet Union.” He added that the United States welcomed this
development “as a practical example of the continuing unity and
mutual helpfulness which should characterize the acts of members of
the United Nations in peace as well as in war.”

Nevertheless early in September the American Embassy in Moscow
registered a note of caution regarding the significance of the Sino-
Soviet arrangements and their relation to the historic course of Rus-
sian imperialism. In a telegram of September 10, 1945, to the Depart-
ment the American Embassy in Moscow summarized its views with
respect to Russian intentions in the Far East as follows:

“1. The pact was not necessary for the achievement of any im-
mediate objectives now being obtained by the Red Army. Regardless
of the existence of the pact these objectives, including the military
occupation of Manchuria and the Liaotung Peninsula, could and would
have been achieved.

“2. The effect of the agreements concerning Manchuria should cause
no illusion. Russian willingness to withdraw its forces and to admit
Chinese to civil affairs control reflects mature statesmanship on the
part of Stalin and his Moscow advisers. The initial Russian position
as an occupying power, together with greater proximity and the far
greater discipline of Russian power, should make it easy for the Rus-
sians to remain masters of the situation even after Russian troops have
withdrawn. It was tacitly understood by both parties to the Moscow
negotiations that Chinese officials in Manchuria would for the most
part have to be amenable to Russian influence. Chinese Communist
forces, according to recent broadcasts, have been ordered to enter Man-
churia and in cooperation with the Russian army, to accept the Japan-
ese surrender. Logically, the Russian authorities and their sym-
pathizers will encourage the use of these Communist forces in the ad-
ministration of Manchuria after the evacuation of the Russian Army.
It should also be realized that local Russian authorities, in matters
concerning the internal affairs of neighboring countries, do not always
exercise the same restraint as does the Kremlin.

“3. Nothing in the internal regime of Outer Mongolia will be
changed with its independence. The only effect will be its elimination
as a possible source of future Chinese irredentism and an increase in
its usefulness as an instrument for future Russian expansion.

“4. Russian assurances of support to the National Government and
of non-interference in internal Chinese affairs reaffirms what has
existed for some time. It is probable that any Kremlin control over

YALTA AGREEMENT AND SINO-SOVIET TREATY OF 1045 123

the Chinese Communists has been through the Party apparatus and
not through government channels. It seems likely that this situation
will obtain in the future— namely, control through the Party. The
bargaining position of the Chinese Communists on the basis of implied
military support is undoubtedly weakened by the Russian assurances.
On the other hand, these assurances (a) remove any excuse for a Sino-
American crusade against the Chinese Communists as a spearhead
of Russian penetration of China, (b) to a considerable extent dispel
general suspicion of Russian intentions in China and thus disarm
average critics of the Russian role there, and (c) place Russian policy
in China on a high and disinterested moral plane. In the meantime,
the Russian Communist Party can continue to support the Chinese
Communist program of “democratization,” and to exert political pres-
sure on the National Government to compromise.

“5. There should be no misunderstanding of Russian intentions
toward Japan and Korea simply because of superficial Russian modera-
tion on Manchuria. In the Russian zone of Korea Communist-trained
Korean elements are already being given responsibility for civil affairs.
It is a natural tendency or even a deliberately conceived policy for the
Russians to seek maximum internal influence in near-by areas through
use of persons trained to accept their discipline and to share their
ideology.”

SOVIET ATTITUDE TOWARD MANCHURIAN INDUSTRIES

About the same time the United States became disturbed over de-
velopments in Manchuria. Upon the defeat of Japan, the Soviet
Union accepted the surrender of Japanese forces in Manchuria, as well
as in southern Sakhalin and the Kurile Islands. While its troops were
in Manchuria, the Soviet Government removed considerable Japanese-
owned industries and equipment from Manchuria, on the ground that
such property was “war booty” because it had been used to support
the Japanese war effort. The United States protested these removals
to the Soviet Union on a number of occasions, objecting not only to
the inclusion of these industries in the concept of war booty, but also
to the unilateral action of the Soviet Government in removing Japa-
nese industries from Manchuria. The United States took the position
that the disposition of Japanese property in Manchuria should be
decided by an Inter- Allied Reparations Commission for Japan on the
same basis as for Japanese external assets located in other countries. 851

When the Soviet Union proposed to China early in 1946 that control
of Japanese industrial enterprises in Manchuria be shared by agree-
ment between the two states, the United States informed both China

See annex 60.

124

U. S. RELATIONS WITH CHINA

and the Soviet Union that the establishment of such exclusive bilateral
control would be contrary to the principle of the Open Door and would
constitute clear discrimination against Americans who might wish to
participate in the development of Manchurian industry.

DISCUSSIONS AT THE MOSCOW CONFERENCE, 1945

At the Moscow Conference of the Foreign Ministers of the United
Kingdom, the United States and the Soviet Union, in December 1945,
the United States proposed that the question of transfer of control of
Manchuria to the Chinese National Government be included on the
agenda of the Conference. Mr. Molotov, the Soviet Foreign Min-
ister, would not agree to the inclusion of this question. He explained
that it was not necessary inasmuch as the Soviet Union had a special
agreement with China concerning Manchuria and that there were no
differences between the two countries on the subject. He said that
the evacuation of Russian troops from South Manchuria was com-
pleted and that the evacuation from North Manchuria would have
been completed if the Chinese Government had not requested that it
be delayed for a month. Mr. Molotov insisted, however, on discussing
the presence of United States troops in North China. Secretary
Byrnes agreed to do so in connection with the disarming, of Japanese
forces in North China.

During the several meetings at which this question was discussed,
Mr. Byrnes made the point that American forces in China were merely
assisting in the demobilization of J apanese troops and their deporta-
tion from the area. He indicated that this task had been assumed
from a feeling of responsibility for the maintenance of peace in North
China which was one of the motives prompting the dispatch of Gen-
eral Marshall on special mission. Mr. Molotov stated that the evacua-
tion of Russian troops from Manchuria would be completed by
February 1, 1946, and that the Chinese simply wanted to get others to
do their work. He added that it was intolerable that there were still
Japanese forces which had not yet been disarmed. He called attention
to a Soviet memorandum of December 21 which objected to “other
foreign troops” assisting in the disarming of Japanese forces in China
and demanded that the United States agree with the Soviet Union on
a date not later than the middle of January 1946 for simultaneous
evacuation of their respective forces from China. In this memoran-
dum the Soviet Government declared that it adhered to a policy of
non-interference in the internal affairs of China and indicated that
“other states” should do likewise. Mr. Byrnes reiterated that the
United States was merely carrying out its responsibilities and denied
that the United States was interfering in Chinese internal affairs. He

YALTA AGREEMENT AND SINO-SOVIET TREATY OF 1945 125

emphasized that the United States desired a unified and united China,
and asked for Soviet cooperation to that end. In a subsequent con-
versation with Secretary Byrnes, Generalissimo Stalin also objected
to the use of American troops in the demobilization of Japanese
forces in China.

The communique issued at the close of the Moscow Conference con-
tained the following statement regarding China :

“The three Foreign Secretaries exchanged views with regard to the
situation in China. They were in agreement as to the need for a
unified and democratic China under the National Government, for
broad participation by democratic elements in all branches of the
National Government, and for a cessation of civil strife. They reaf-
firmed their adherence to the policy of noninterference in the internal
affairs of China.

“Mr. Molotov and Mr. Byrnes had several conversations concerning
Soviet and American armed forces in China.

“Mr. Molotov stated that the Soviet forces had disarmed and de-
ported Japanese troops in Manchuria but that withdrawal of Soviet
forces had been postponed until February 1st at the request of the
Chinese Government.

“Mr. Byrnes pointed out that American forces were in north
China at the request of the Chinese Government, and referred also
to the primary responsibility of the United States in the implementa-
tion of the Terms of Surrender with respect to the disarming and
deportation of Japanese troops. He stated that American forces
would be withdrawn just as soon as this responsibility was discharged
or the Chinese Government was in a position to discharge the respon-
sibility without the assistance of American forces.

“The two Foreign Secretaries were in complete accord as to the
desirability of withdrawal of Soviet and American forces from China
at the earliest practicable moment consistent with the discharge of
their obligations and responsibilities.”

AMERICAN PROTESTS ON DAIREN

Because Dairen was not opened to commercial vessels in the months
following the surrender of Japan, the United States on two occasions
during 1947 protested to the Soviet Government on the grounds that
American commercial activity was hindered by the* port’s not being
opened to traffic. The Soviet Union replied by referring to the pro-
vision of the agreement regarding Dairen of August 14, 1945, which
stated that, in case of war with Japan, Dairen was to come under the
control of the military regime authorized for the Port Arthur naval
base area. The Soviet Union added that in as much as the war with

126

U. S. RELATIONS WITH CHINA

Japan had not been terminated, there being no peace treaty, Dairen
came under the administration of the Port Arthur naval base. The
Soviet Government also stated that it “sees no basis for a change of the
regime” under which Dairen remained closed to commercial intercourse
with other countries. Thus the United States protests were of no
avail.

CONCLUSION

At the time that the Sino-Soviet Treaty and related agreements
were concluded they were generally considered in the most favorable
light. It was thought that the arrangements would provide a firm
basis for peaceful and harmonious relations between the two countries.
The Yalta Agreement had, of course, been dictated by military neces-
sity and the vital importance of ensuring the entry of the Soviet Union
into the Far Eastern war before the Allied invasion of Japan which
had been set for the autumn of 1945. Although the unexpectedly
early collapse of J apanese resistance later made some of the provisions
of the Yalta Agreement seem unnecessary, the Agreement and the sub-
sequent Sino-Soviet Treaty in fact imposed legal limitations on the
action which Russia would, in any case, have been in a position to take.
At Yalta, Marshal Stalin not only agreed to declare war on Japan
within two or three months after V-E Day but limited his “price”
with reference to Manchuria substantially to the position which
Russia had occupied there prior to 1904. In the Sino-Soviet Treaty,
furthermore, the Soviets agreed to give the National Government of
China moral and material support and moreover formalized their
assurances of noninterference in Chinese internal affairs. In view
of world developments since the conclusion of hostilities against
Japan, especially in recent years, there is no evidence to suggest that
the absence of such arrangements would have restrained the Soviet
Union from pursuing Russia’s long-range traditional objectives.
Even though the Soviet Union has not seen fit to honor its signed
agreements in practice, their existence has had, as the National
Government itself has admitted, moral and legal advantage for that
Government.

CHAPTER V

The Mission of General George C. Marshall

1945 - 1947 1

I. THE ECONOMIC, MILITARY AND POLITICAL

SETTING

INTRODUCTION

After the successful termination of the war against Japan, and at
the time General Hurley left Chungking, there were several elements
in the situation which plausibly argued that prospects for peace and
reconstruction in China were reasonably good. The negotiations be-
tween the National Government and the Chinese Communists had
reached a stage of agreement on general principles and General
Hurley himself felt that agreement on details and implementation was
by no means impossible. Both participants in the negotiations still
professed their desire and intention to seek a political settlement and
there could be little doubt that the overwhelming popular demand was
for peace.

Perhaps the most important factor immediately after V-J Day was
the economic situation, which, despite the brutal and devastating
effects of eight years of war, was surprisingly good and contained
many elements of hope.

GENERAL ECONOMIC SITUATION IMMEDIATELY AFTER V-J DAY

In China proper, although there had been serious wartime dis-
ruption in certain sectors of the economy, the productive potential of
agriculture, mining, and industry in most of the area taken from the
Japanese was not substantially different from that of 1937. The
expulsion of the Japanese from Manchuria and Formosa promised
to increase several-fold the national industrial plant and to contribute
to the achievement of national self-sufficiency in food. Such economic
problems as could be foreseen in the late summer of 1945 related less

1 The bulk of the material for this chapter has been drawn from the files of
General Marshall’s Mission.

127

128

U. S. RELATIONS WITH CHINA

to the reconstruction of productive equipment than to the organization
of production and distribution through facilities already available.

Except in those parts of Central and South China which had been
subjected to active military operations in 1944-1945, production of
foodstuffs was at or near prewar levels, but agricultural production
had shifted significantly away from cash crops, such as cotton, to
food crops for local consumption. Heavy losses were inflicted on
inland and coastal shipping during the war years, and the railroad
from Peiping to Canton and others in South China had suffered
serious damage, but the efficiency of the greater portion of railroad
facilities was only moderately impaired. The number of motor
vehicles in operation had actually increased somewhat during the war.
Coal production had increased by about 25 percent under Japanese
management. On the other hand, electric power supply in China
proper decreased significantly because of the loss of over one-quarter
of prewar generating capacity.

Wartime changes in industrial capacity were not important, except
in the iron and cotton textile industries. Despite destruction of facil-
ities at Hankow by retreating Chinese forces, total pig iron capacity
was increased by about 50 percent over prewar levels during the occu-
pation. Cotton spinning capacity, however, fell sharply. A full year
after Japanese surrender little more than half of the prewar total of
nearly 5 million spindles was in operation. An additional 1.4 million
spindles were reparable but w T ere not expected to be brought into pro-
duction for another year. The principal economic effects of eight
years of war and invasion appear to have been not so much the
destruction of wealth or the diversion of production into new channels
as the suspension of the process of industrialization and the disrup-
tion of the new national monetary system.

In regaining Manchuria, China would inherit the extensive
industrial complex built by the Japanese and a rich agricultural
area capable of producing a substantial export surplus. With
about one-fourth of the total area and one-ninth the population, Man-
churia had come to possess an industry over four times as large as that
of China proper, and an electric generating capacity nearly three
times as large. The density of Manchuria’s rail net was over four
times as great as that of China proper.

China’s economic gains in resuming administration over For-
mosa after a lapse of 50 years were smaller than, but similar in
nature to those in prospect on V-J Day in Manchuria. Formosa also
had traditionally a large export surplus of agricultural products.
Japanese industrial achievements were less impressive in Formosa

THE MISSION OF GENERAL GEORGE C. MARSHALL 129

than in Manchuria, but a wartime boom had given Formosa a sub-
stantial productive capacity in aluminum, petroleum products, and
electric power, in addition to its older capacity in sugar refining and
other food exporting industries. Both agriculture and industry in
Formosa, however, had suffered severely during the war. Irrigation
works and crops themselves had suffered heavy typhoon damage in
1944 and 1945, and food production had declined for lack of adequate
fertilizer. Industry, the electric power distribution system, and
harbor facilities were crippled by Allied bombing in the last months
of the war.

CHINA’S FINANCIAL POSITION

China’s foreign exchange holdings at the conclusion of the war with
Japan were by far the largest in the history of that country. The
principal fiscal asset of the Chinese Government at the end of the war
against Japan was its unprecedentedly large reserves of gold and
U. S. dollar exchange, which were estimated to total over 900 million
United States dollars on December 31, 1945. The accumulation of
these reserves had been made possible by virtue of the nondisburse-
ment of a substantial portion of the 500 million dollar American
credit authorized in 1942, and by United States Government pay-
ments during the war of approximately 400 million dollars to the
Chinese Government against advances of Chinese currency and
Chinese Government expenditures on behalf of the 'United States
Army. In addition to these reserves of the Chinese Government,
private Chinese held very substantial foreign exchange assets, most
of which could be used to finance imports into China. Although com-
plete data regarding private Chinese holdings of gold, silver and
other foreign exchange assets is not available, it has been estimated
conservatively that such holdings on V— J Day amounted to at least
several hundred million United States dollars.

Optimism based upon China’s very favorable foreign exchange
position was tempered by realization of the magnitude of the recon-
struction task in some parts of the economy, as well as the necessity
of immediate large-scale imports of food and industrial raw ma-
terial. Pending the re-establishment of normal internal trade, in-
dustrial production could be maintained and consumer welfare pro-
tected only by the purchase abroad of relatively large quantities of
such essential commodities as cotton and grain. Reconstruction was
most urgently needed in the field of transportation. Substantial
assistance in obtaining the abnormal volume of imports needed in
connection with postwar reconstruction and rehabilitation was an-

TJ. S. RELATIONS WITH CHINA

130

ticipated from Unrra. The ultimate soundness of the international
financial position of the Chinese Government depended, however, on
the speed with which export industries and remittances from Chinese
overseas regained their prewar levels.

The Chinese Government also faced financial problems of a large y
domestic nature. Inflationary methods of finance had been resorted
to during the war as the only means of maintaining resistance against
the Japanese in the face of the loss of the richest part of the national
territory, the disruption of normal trade, and the disorganization of
public administration. Bringing the wartime inflation to a halt was
essential to post-war economic recovery, but such action depended
upon an expansion of revenues and a reduction in military expendi-
tures. After the war, the Government regained control of the great-
est revenue producing areas of China proper, and, of course, looked
forward to the Manchurian and Formosan economies as rich sources
of revenue. The extensive industrial properties taken over from
the Japanese promised to provide the Government with a new and
non-inflationary source of funds. No accurate appraisal of the value
of these properties is available but, in addition to the major Govern-
ment properties acquired in Manchuria and Formosa, the Chinese
Government fell heir to Japanese cotton mills in China proper with
a total of almost two million spindles, representing nearly half of
the nation’s cotton spinning industry, as well as various other
Japanese-owned industrial facilities.

In prospect, the Government’s financial position on V-J Day was
reasonably bright. The inter-related problems that it faced both do-
mestically and internationally were sizable, but at the same time it
possessed assets which appeared capable of making a large contribution

to their solution.

UNFAVORABLE ELEMENTS

Despite the favorable elements in the negotiations and in the eco-
nomic situation there was reason during the fall of 1945 for grave con-
cern that the prospects of peace and stability in China were.in serious
jeopardy. The Chinese Communists had refused to recognize orders
issued by the National Government concerning acceptance of surrender
of Japanese and Chinese puppet troops and were proceeding, insofar
as their capacity permitted, to accept such surrender, to seize enemy
materiel, and to occupy enemy territory. The result was a series of
increasingly frequent and widespread clashes between the armed forces
of the Government and of the Chinese Communist Party. These
clashes spread to other areas as well, to such an extent that competent
observers had grave doubts as to the possibility of a peaceful settlement.

THE MISSION OF GENERAL GEORGE C. MARSHALL 131

GENERAL WEDEMEYER’S REPORTS

On November 14, 1945, Lieutenant General Albert C. Wedemeyer,
Commanding General, China Theater, reported to Washington that
the National Government was completely unprepared for occupation
of Manchuria in the face of Communist opposition. He also re-
ported his recommendation to the Generalissimo that the Chinese
should adopt the immediate objective of consolidating the areas south
of the great wall and north of the Yangtze and of securing the over-
land line of communications in that area prior to entry into
Manchuria.

Again on November 20, 1945, he reported as follows :

“I have recommended to the Generalissimo that he should concen-
trate his efforts upon establishing control in north China and upon the
prompt execution of political and official reforms designed to remove
the practice of corruption by officials and to eliminate prohibitive
taxes.”

General Wedemeyer also recommended the utilization of foreign
executives and technicians, at least during the transition period. He
then added :

“Chinese Communist guerrillas and saboteurs can and probably
will, if present activities are a reliable indication, restrict and harass
the movements of National Government forces to such an extent that
the result will be a costly and extended campaign. . . . Logistical
support for National Governmental forces and measures for their
security in the heart of Manchuria have not been fully appreciated
by the Generalissimo or his Chinese staff. These facts plus the lack
of appropriate forces and transport have caused me to advise the
Generalissimo that he should concentrate his efforts on the recovery
of north China and the consolidation of his military and political
position there prior to any attempt to occupy Manchuria. I re-
ceived the impression that he agreed with this concept.”

Among General Wedemeyer’s conclusions at that time were the
following :

“1. The Generalissimo will be able to stabilize the situation in south
China provided he accepts the assistance of foreign administrators
and technicians and engages in political, economic and social reforms
through honest, competent civilian officials.

“2. He will be unable to stabilize the situation in north China for
months or perhaps even years unless a satisfactory settlement with the
Chinese Communists is achieved and followed up realistically by the
kind of action suggested in paragraph 1.

132

U. S. RELATIONS WITH CHINA

“3. He will be unable to occupy Manchuria for many years unless
satisfactory agreements are reached with Russia and the Chinese
Communists.

“4. Russia is in effect creating favorable conditions for the realiza-
tion of Chinese Communist and possibly their own plans in north
China and Manchuria. These activities are violations of the recent
Sino-Russian Treaty and related agreements.

“5. It appears remote that a satisfactory understanding will be
reached between Chinese Communists and the National Government.”

The final recommendation of General Wedemeyer was the establish-
ment by the United States, Great Britain and Russia of a trusteeship
over Manchuria until such time as the National Government had be-
come sufficiently strong and stabilized to assume responsibility of full
control over the area. One of the principal reasons which led Gen-
eral Wedemeyer to the above conclusions was his conviction that
National Government abuses and malpractices had already created
serious discontent among the local population in areas taken over from
the Japanese, and even this soon after the end of the war against Japan
had seriously alienated a considerable amount of sympathy for the
National Government.

It is against this checkered background that the mission of General
Marshall should be considered.

GENERAL MARSHALL’S APPOINTMENT AND INSTRUCTIONS

When President Truman announced on November 27, 1945, his
acceptance of Ambassador Hurley’s resignation, he announced also the
appointment of General of the Army George C. Marshall as his Spe-
cial Representative in China, with the personal rank of Ambassador.
In the instructions which he addressed to General Marshall on De-
cember 15, la the President asked the General to bring to bear the in-
fluence of the United States to the end that the “unification of China
by peaceful, democratic methods” might be achieved as soon as pos-
sible and concurrently to endeavor to effect a cessation of hostilities,
particularly in North China. To assist in the accomplishment of this
mission General Marshall was authorized to speak to Generalissimo
Chiang Kai-shek and other Chinese leaders “with the utmost frank-
ness” and to state that “a China disunited and torn by civil strife”
was not a proper place for American economic assistance in the form
of credits or technical assistance nor for American military aid.

lR See annexes 61, 62.

THE MISSION OF GENERAL GEORGE C. MARSHALL 133

THE PRESIDENT’S POLICY STATEMENT OF DECEMBER 15, 1945

A portion of General Marshall’s instructions, in the form of a
Presidential statement on United States policy toward China, was
released on December 15 for publication the following day. lb Stating
that a “strong, united, and democratic China” was of the utmost
importance to world peace, the President declared that it was “in the
most vital interest of the United States and all the United Nations
that the people of China overlook no opportunity to adjust their in-
ternal differences promptly by methods of peaceful negotiation.” He
called for a cessation of hostilities in China, but pledged that there
would be no American military intervention to influence the Chinese
civil fighting, explaining the presence of American troops in North
China in terms of the necessity for disarming and evacuating sur-
rendered Japanese troops still on Chinese soil.

President Truman further urged the convening in China of a na-
tional conference of the major Chinese political elements to develop
a solution to the problems of China which would not only end internal
strife but would also bring about unification of the country on terms
which would give all major political elements fair and effective repre-
sentation in the Chinese Government. This obviously meant modifi-
cation of the Kuomintang’s system of “political tutelage” and the
broadening of the base of government. The President pointed out
that the detailed steps necessary to the achievement of political unity
in China must be worked out by the Chinese themselves and disowned
any intention of intervening in these matters. He declared, however,
that China and all parties and groups in China had a clear responsi-
bility to the other United Nations to eliminate armed civil conflict,
which was a threat to world stability and peace.

The President concluded by promising American assistance, as
China moved toward peace and unity, in the rehabilitation of the
country, in the improvement of the industrial and agrarian economy,
and in the establishment of a military organization “capable of dis-
charging China’s national and international responsibilities for the
maintenance of peace and order.”

THE BEGINNING OF THE MARSHALL MISSION

In the light of these instructions General Marshall undertook the
execution of his mission immediately upon his arrival in Chungking.
The complex problems in China fell largely under three heads —
political, military and economic— but they frequently became so en-
tangled that discussion of them cannot be separated. This was par-
ticularly true of the political and military problems, for the two

3b For full text see annex 62.

134

U. S. RELATIONS WITH CHINA

principal Chinese parties to the negotiations in which General Mar-
shall took part, the National Government and the Chinese Communist
Party, frequently made military action or inaction a sine qua non for
a political concession, or vice versa.

The President’s Special Representative acted both as an intermedi-
ary between Generalissimo Chiang Kai-shek and the representatives
of the Chinese Communist Party and as an adviser to or member of
certain bodies, or committees, which were established in the effort to
reach agreement on China’s problems. He also exercised initiative in
giving each side impartially and confidentially the benefit of his
analysis of the situation as it developed, and in drafting various state-
ments and agreements which he thought might move the negotiations
forward.

Throughout his mission General Marshall kept the President and
the Secretary of State fully informed of the progress of the negotia-
tions, of his actions in connection with these negotiations and of his
estimate of the situation in China. His actions and decisions had the
unqualified support and approval of the President and the Secretary
of State.

The negotiations themselves were most difficult and most complex.
As it turned out General Marshall was often unable to bring the two
sides to complete agreement on a set of terms before the situation
changed, frequently as a result of what he considered bad faith on one
side or the other, and a new set of proposals based on the new situa-
tion became the basis of discussion. This chapter largely forms a
narrative, therefore, of the constantly shifting situations, proposals,
counterproposals, and discussions, starting with the political and
military situation which General Marshall found in China upon his
arrival. Economic matters concerning Sino-American relations dur-
ing the period of the Marshall mission, however, have been separated
from the rest of this narrative insofar as possible and grouped together
toward the end of the chapter.

RECAPITULATION OF CHINESE POLITICAL BACKGROUND FOR THE
MISSION

Dr. Sun Yat-sen’s program for China had envisaged a period of
“political tutelage” under the Kuomintang as the necessary prepara-
tion for the establishment of constitutional government in China.
The Kuomintang had thus been committed to end its one-party con-
trol of government and to convene a National Assembly for the pur-
pose of adopting a constitution and forming a new government, and
a draft constitution had actually been promulgated by the National
Government on May 5, 1936. A National Assembly had been sched-

THE MISSION OF GENERAL GEORGE C. MARSHALL

135

uled to be convened in November 1937 to adopt the constitution, but
the outbreak of hostilities with J apan had resulted in a postponement
of this Assembly. Preparations for the convening of the Assembly
had continued, however, during the war with Japan and at a meet-
ing of the Kuomintang Central Executive Committee in September
1943, Generalissimo Chiang Kai-shek had indicated that with the es-
tablishment of representative institutions the Kuomintang would lose
all special privileges and other parties would be equal to it in rights
and freedoms. The Generalissimo had also stated on September 13,
1943:

“. . . I am of the opinion that first of all we should clearly recog-
nize that the Chinese Communist problem is a purely political prob-
lem and should be solved by political means.”

The Central Executive Committee had accordingly passed a resolution
providing that within one year after the conclusion of the war the
National Government was to convene a National Assembly to adopt
and promulgate a constitution. Shortly thereafter, the Generalis-
simo appointed a committee of 53, including 2 Communist representa-
tives, to lay the groundwork for constitutional government. In May
1944 a Communist representative held preliminary conversations at
Sian with two high-ranking National Government representatives and
later proceeded to Chungking where further discussions were held for
a settlement of the differences between the Government and the Chinese
Communists.

In subsequent discussions between the National Government and
the Chinese Communist Party at Chungking shortly after V-J Day
agreement was reached regarding steps to be taken toward the es-
tablishment of a constitutional government. The exact formula was
set forth in the Text of the Summary of National Government-Com-
munist Conversations issued at Chungking on October 11, 1945, and
referred to above. 2

This text provided that questions which were not settled during
these conversations should be referred to a “Political Consultative
Conference.”

It will be noted that President Truman’s statement of December 15,
1945, was entirely consonant with the publicly stated pledges of the
Chinese Government and the Generalissimo regarding a peaceful set-
tlement of the Communist problem and with the agreement reached
between that Government and the Chinese Communist Party in Octo-
ber 1945 providing for the convening of the “Political Consultative
Conference” to discuss measures looking toward the establishment of

2 See chapter III.

136

U. S. RELATIONS WITH CHINA

a constitutional Government. A provisional list of the delegates to
this Conference had been published at Chungking on November 27.
On December 31, 1945, the National Government announced that the
Generalissimo had decided that the Political Consultative Conference
would convene at Chungking on January 10, 1946.

II. THE AGREEMENTS OF JANUARY AND
FEBRUARY 1946

THE CEASE-FIRE AGREEMENT OF JANUARY 10, 1946

Prior to the convening of the Conference, the National Government
presented to the Chinese Communist Party a proposal for the cessa-
tion of hostilities, in which it suggested the formation of a committee
composed of a representative of the National Government and a rep-
resentative of the Chinese Communist Party, with General Marshall
as Chairman, to discuss the question of the cessation of hostilities and
related matters. The Chinese Communist Party having agreed to
the formation of this committee, General Chang Chun was appointed
as the National Government representative and General Chou En-lai
as the Chinese Communist Party representative. This Committee,
called the Committee of Three, held its first formal meeting on J anuary
7, 1946.

During the early conversations of General Marshall with National
Government leaders and Chinese Communist Party representatives in
Chungking the basic distrust between the two groups was apparent.
The National Government was convinced that the U.S.S.B. had ob-
structed the efforts of the National Government to assume control
over Manchuria in spite of the provisions of the Sino-Soviet Treaty
of August 1945 and that the Chinese Communists were tools of the
U.S.S.B. The Chinese Communist Party was suspicious of the Kuo-
mintang and believed that its aim was the destruction of the Chinese
Communist Party. The Government leaders were unwilling to per-
mit Communist participation in the Government until the Communists
had given up their armed forces, while the Communists believed that
to do so without guarantees of their legal political status would end
in their destruction.

In the light of the statement of American policy toward China, which
pointed out that the United States, the United Kingdom, and the
U.S.S.B. were committed by various agreements with the Chinese
Government to the return of all China, including Manchuria, to
Chinese control, General Marshall envisaged a solution which would
be in accord with these agreements and which would result in bringing
this area under the control of a unified China.

THE MISSION OF GENERAL GEORGE C. MARSHALL 137

With that end in view, he had informed General Chou En-lai on
January 4 that the United States Government was committed to the
movement of National Government troops to Manchuria. General
Chou expressed his agreement to the inclusion of an exception in the
cessation of hostilities agreement to permit the movement of National
Government troops into Manchuria and added that the movement of
such troops conformed to American policy and to the Sino-Soviet
Treaty of August 1945.

The Committee of Three reached an agreement on January 10 for
the cessation of hostilities. In accordance with this agreement, both
the Generalissimo and Mr. Mao Tse-tung, Chairman of the Chinese
Communist Party, issued orders to their respective armed forces to
cease hostilities and halt all movements of troops, with certain ex-
ceptions which were included in stipulations regarding the cease-fire
order and were made public in a press release. 3 These stipulations
provided for the movement of National Government troops into and
within Manchuria for the purpose of restoring Chinese sovereignty
and for the movement of National Government troops south of the
Yangtze River in connection with the Government military reorgani-
zation plan. The cease-fire order was to be effective at midnight on
January 13, thus allowing time for the transmission of the order to
commanders in the field. The order further provided for the cessation
of destruction of and interference with all lines of communication
and for the removal of obstructions placed against or interfering
with such lines.

The agreement also provided for the establishment of an Executive
Headquarters at Peiping to carry out the agreement for the cessation
of hostilities. 4 This headquarters, which began its official functions
on January 14, was to consist of three commissioners, one representing
the National Government, one representing the Chinese Communist
Party, and one representing the United States. The National Gov-
ernment and the Chinese Communist Party were to have equal repre-
sentation in the operations section of the Executive Headquarters and
in the teams to be sent to the field to carry out on the spot the pro-
visions of the cease-fire order and the directives of the headquarters.
The necessary instructions and orders agreed upon unanimously by

3 See annex 63.

4 See annex 71 for full text of the document establishing the Executive Head-
quarters and for a memorandum on operations of the Executive Headquarters.
American military and naval personnel in China were also charged with certain
functions concerning repatriation of Japanese, a task which was fulfilled with
the highest degree of effectiveness so that by the end of 1946 a total of almost
3,000,000 Japanese military personnel and civilians had been repatriated to
Japan. A memorandum on this operation is also included in annex 71.

138

U. S. RELATIONS WITH CHINA

the three commissioners were to be issued in the name of the Presi-
dent of the Republic of China. It was made clear that American
participation in the headquarters was solely for the purpose of
assisting the Chinese members in the implementation of the cease-fire
order.

THE POLITICAL CONSULTATIVE CONFERENCE

The agreement for the cessation of hostilities enabled the Political
Consultative Conference (hereafter called the PCC) to convene in an
atmosphere of peace. The PCC, which was in session at Chungking
from January 10 to 31, 1946, was composed of representatives of the
Kuomintang, the Chinese Communist Party, the Democratic League,
and the Youth Party and of non-party delegates. It met as a con-
sultative body without any legal authority to enforce its decisions.
Morally, all groups represented were obligated to accept the decisions,
but legally the PCC resolutions were subject to approval by the central
committees or governing bodies of the various parties represented.

At the opening session of the PCC, Generalissimo Chiang Kai-shek
announced the decision of the Government to grant immediately cer-
tain fundamental democratic rights. They included freedom of
speech, assembly, and association; equal legal status for all political
parties ; the holding of popular elections ; and the release of political
prisoners. On January 31, the PCC held its final session and released
to the press the text of the resolutions agreed upon. 5 These resolutions
were divided into five main headings as follows: (1) Government
Organization; (2) Program for Peaceful National Reconstruction;
(3) Military Problems; (4) Agreement on the National Assembly;
and (5) the 1936 Draft Constitution.

In his address to the closing session of the PCC, the Generalissimo
made the following statements regarding the PCC resolutions : 6
“I wish to declare first on behalf of the Government that they will
be fully respected and carried out as soon as the prescribed procedures
have been completed. I pledge at the same time that I will uphold this
program faithfully and will also see to it that all the military and
civil subordinates follow it strictly. From now on, I will, whether
in the Government or out of it, faithfully and resolutely observe, as
a citizen should, all the decisions of this Conference.”

In contrast to the Generalissimo’s statements, however, there were
indications of strong opposition to the PCC resolutions among power-
ful reactionary groups in the Kuomintang. Minority party reaction
to the decisions of the PCC was shown in the issuance of categorical

6 See annexes 64, 65, 66, 67, 68.

0 As reported by the Kuomintang Ministry of Information.

THE MISSION OF GENERAL GEORGE C. MARSHALL 139

statements by the Chinese Communist Party, the Democratic League,
and the Youth Party of their intention to carry out the PCC
resolutions.

General Marshall did not act as a mediator or participate in the
discussions of the Political Consultative Conference. In accordance
with the Generalissimo’s request, he did, however, have prepared a brief
draft of an act for possible promulgation by the National Government
which included a bill of rights, a provision for drawing up a constitu-
tion to be submitted to the National Assembly in May and a provision
for the establishment of an interim coalition government reposing in
the Generalissimo power of control as the President of all China prior
to the formation of the constitutional government. This draft was
presented to the Generalissimo on a confidential basis on January 23.

THE PCC RESOLUTIONS

The PCC resolutions provided for convening a National Assembly
on May 5, 1946, for the purpose of adopting a constitution and for
the formation of a Constitution Draft Committee to draw up a
detailed plan for revision of the 1936 Draft Constitution based on
the principles agreed upon by the PCC, as well as recommendations
of various associations connected with the promotion of constitu-
tionalism in China. This plan was to be submitted to the National
Assembly for adoption. The PCC resolutions also provided that, pend-
ing the convening of the National Assembly, the Kuomintang would
revise the organic law of the National Government to make the State
Council the supreme organ of the Government in charge of national
affairs. This Council was to be composed of 40 members, who would
be chosen by the Generalissimo from Kuomintang and non-Kuomin-
tang members. Half of the Councillors would be members of the
Kuomintang and half members of other parties and non-party per-
sonnel. The specific allotment of seats of non-Kuomintang Coun-
cillors was to be the subject of separate discussion after the adjourn-
ment of the PCC. The PCC resolutions regarding the State Council
empowered the President to veto any decision of the Council, and
such a veto could be overridden only by a three-fifths vote of the
Council. General resolutions would require a majority vote of the
Councillors present, but any resolutions involving changes in the
administrative policy would be required to have a two-thirds vote of
the members present for approval. However, a majority vote of
the members present would be sufficient to decide whether a resolu-
tion involved a change in administrative policy. The PCC resolutions
regarding the membership of the State Council and the question of
the veto power subsequently played an important part in the negotia-

140

U. S. RELATIONS WITH CHINA

tions between the Chinese Government and the Chinese Communist
Party. The question of the veto power arose in discussions regarding
membership in the State Council. The Chinese Communist Party
began to advance claims for control of at least 14 seats in the Council
among its own members and friendly nominees. With this number
the Chinese Communist Party would have sufficient voting strength
to exercise a veto to prevent changes in the PCC resolutions.

Under the Program for Peaceful National Reconstruction of the
PCC resolutions, the equality and legality of all political parties were
recognized and all parties were pledged to recognize the national
leadership of President Chiang Kai-shek. The program provided
inter alia for the maintenance of the status quo in liberated areas
where the government was under dispute until a settlement should
be made by the National Government after its reorganization, a point
of considerable importance in later negotiations.

Under the PCC resolutions on military problems, provision was
made for reorganization and reduction of the armies and the creation
of a national army belonging to the State in which no political parties
would be allowed to carry on political activities. It was also pro-
vided that the “Three-Man Military Commission” should agree upon
practical methods for the reorganization of the Chinese Communist
armies at an early date. It was further provided that, when the
reorganization of both the National Government and Communist
armies should be completed, all armies should again be reorganized
into 50 or 60 divisions.

THE MILITARY REORGANIZATION AGREEMENT OF
FEBRUARY 25, 1946

On January 10 the National Government suggested the formation
of a military committee to draw up measures for the reorganization
and redisposition of the Chinese armies. Such a committee had al-
ready been agreed to by the National Government and the Chinese
Communist Party during the negotiations ending in October 1945.
The Chinese Communist Party representatives agreed to this proposal
and both the Chinese Government and the Chinese Communist Party
expressed their approval of General Marshall’s participation in this
committee as an adviser. This committee, known as the Military Sub-
committee, was composed of General Chang Chih-chung as the Na-
tional Government representative, General Chou En-lai as the Chinese
Communist Party representative and General Marshall as adviser.

The Military Subcommittee held its first meeting on February 14,
1946, and on February 25 reached an agreement entitled “Basis for
Military Reorganization and for the Integration of the Communist
Forces into the National Army.” In the press release announcing

THE MISSION OF GENERAL GEORGE C. MARSHALL 141

the agreement, 7 it was explained that the purpose of the agreement
was to facilitate the economic rehabilitation of China and at the same
time to furnish a basis for the development of an effective military
force capable of safeguarding the security of the nation, including
provisions to safeguard the rights of the people from military in-
terference. It was also pointed out that the Executive Headquarters
at Peiping would be charged with responsibility for supervising the
execution of orders necessary to the implementation of the agreement
and that the measures to be decided upon by the Military Subcom-
mittee for the execution of the terms of the agreement would be carried
out over a period of 18 months.

The terms of the agreement envisaged the reduction of the National
Government armies to 90 divisions at the end of 12 months and the
reduction of the Chinese Communist forces to 18 divisions during
that same period. A further reduction at the end of the following
6 months provided for 50 National Government divisions and 10
Communist divisions, the total of 60 divisions of not more than 14,000
men each to be formed into 20 armies. The process of integration was
provided for initially during the seventh month. The National Gov-
ernment and the Chinese Communist Party were required under the
agreement to make provisions for the supply, movement and employ-
ment of their respective demobilized personnel, the National Govern-
ment to assume this responsibility for all demobilized personnel as
soon as practicable. For purposes of integration and deployment,
China was divided into five general areas as follows : Northeast China,
Northwest China, North China, Central China and South China
(including Formosa) and a specific number of armies was provided
for each area at the end of the 12-month period and again at the end
of the full 18-month period. Provision was made for the following
distribution of the armed forces at the end of 18 months : Northeast
China (Manchuria) — 14 National Government divisions and 1 Com-
munist division; Northwest China — 9 National Government divisions;
North China — 11 National Government divisions and 7 Communist
divisions; Central China — 10 National Government divisions and 2
Communist divisions; and South China (including Formosa) — 6
National Government divisions.

In discussions leading to this agreement, General Marshall en-
deavored to emphasize as strongly as possible the necessity of creating
in China a national, nonpolitical military force along the lines of
western military tradition, to be used as a democratic army and not as
an authoritarian weapon. The agreement reached was based upon the
general principle of separating the army from politics and, although

See annex 69.

142

U. S. RELATIONS WITH CHINA

this idea was not expressly stated in the agreement, the various articles
adhered to this general plan. This principle was of the greatest
importance in China, where political power in the final analysis was
dependent upon the possession of military force and where the military
constantly interfered with civil administration or were themselves
legally in control of civil administration by appointment to office. In
a brief speech at the time of the signing of this agreement General
Marshall made the following statement: “This agreement, I think,
represents the great hope of China. I can only trust that its pages
will not be soiled by a small group of irreconcilables who for a selfish
purpose would defeat the Chinese people in their overwhelming desire
for peace and prosperity.”

The agreement required the National Government to prepare and
submit to the Military Subcommittee, within 3 weeks of the promulga-
tion of the agreement, a list of the 90 divisions to be retained and the
order of demobilization of units during the first 2 months. Such a list
was submitted on March 26. The agreement similarly provided for the
preparation and submission to the Committee by the Chinese Com-
munist Party, within 3 weeks of the promulgation of the agreement,
of a complete list of all its military units, together with a list of the
18 divisions to be retained and the order of demobilization of units
during the first 2 months — a provision with which the Communists
never complied. It was further provided that within 6 weeks after
the promulgation of this agreement both the National Government
and the Chinese Communist Party should furnish to the Committee
lists of the units to be demobilized.

Agreement was reached by the Military Subcommittee on February
27, 1946, on a directive 8 to the Executive Headquarters implementing
the basic plan for military reorganization and integration of the Com-
munist armies into the National Army. The directive, signed on
March 16, 1946, established the Executive Headquarters as the agency
for the execution of the basic plan and provided for the formation of
a group in the headquarters, composed of National Government,
Chinese Communist Party, and United States personnel, to plan and
supervise the execution of the plan. The directive also provided for
the complete disbandment within 3 months of Chinese puppet units
who had served the Japanese and for the establishment of a 12- week
basic training program for the National Government and Communist
Party divisions to be retained. The directive recommended the estab-
lishment of a Demobilized Manpower Commission, which should co-
ordinate its efforts with those of the Government, the Communist

8 See annex TO.

THE MISSION OF GENERAL GEORGE C. MARSHALL 143

Party, civilian agencies, relief organizations, and the Executive Head-
quarters.^

The conclusion of the agreement for military reorganization marked
the third major step in bringing peace to China and in establishing
a basis for unification of the country. The cessation of hostilities
agreement was designed to bring to a halt actual fighting in order
that negotiations for a political and military settlement could be car-
ried on in an atmosphere of peace. The PCC resolutions represented
an agreement on the questions of governmental reorganization and
the establishment of a constitutional government. The Basis for
Military Reorganization similarly provided an agreement on the
question of integration of the Communist Party armed forces into
the National Army and the reorganization of all armies in China
on a democratic base.

It should be noted that the political and military agreements recog-
nized the preponderant strength of the Kuomintang position in the
National Government. In the interim State Council, which was to
function until the establishment of constitutional government through
action of the National Assembly, the Kuomintang was allocated 20
of the 40 seats. The President was empowered to veto any decision
of the Council and his veto could be overriden only by a three-fifths
vote of the members of the Council. Under the military reorgani-
zation plan, the preponderant strength of the National Government
was recognized by provision for a National Government superiority
of 5 to 1 in relation to the Communist forces, by which at the end of
the 18-month reorganization and integration period the National
Army would have 50 Government and 10 Communist divisions.

CHINESE PUBLIC REACTION

The immediate reaction of the Chinese public to the cessation of
hostilities and the announcement of the PCC resolutions was one of
enthusiastic approval, tempered by the realization that the imple-
mentation of the resolutions would be the acid test by which the sin-
cerity of the two rival parties could be gauged. The indication of
strong resentment against the PCC on the part of powerful groups
within the Kuomintang and the opposition by a powerful group of
National Government Army generals to any reorganization of the
armies which would threaten their position were seen as obstacles,
on the Kuomintang side, to successful implementation of the resolu-
tions. Disquieting incidents, such as an attack by alleged Kuomin-
tang plain-clothes men on a mass meeting held at Chungking to cele-
brate the success of the PCC, police interference with minority party
delegates to the PCC, and an attack on the Communist Party news-

** See Annex 71.

144

U. S. RELATIONS WITH CHINA

paper premises at Chungking, all served to strengthen the fears of
opposition to the PCC by irreconcilable elements in the Kuomintang.

KUOMINTANG ACTION ON THE PCC RESOLUTIONS

The next step in connection with the PCC resolutions of January 31
was that of obtaining legal action by the National Government to
approve these resolutions. The Central Executive Committee (here-
after called the CEC) of the Kuomintang met at Chungking from
March 1 to 17 for the purpose of passing upon the PCC resolutions.
Simultaneously with the CEC sessions, there were also held at Chung-
king meetings of the PCC Steering Committee and the PCC Constitu-
tional Reviewing Committee, in which discussions were held of points
which the CEC reportedly wished to have revised. Although the CEC
announced at the end of its sessions that it had approved the PCC
resolutions in toto , 9 there were indications that approval had been
hedged by reservations and that irreconcilable elements within the
Kuomintang were endeavoring to sabotage the PCC program. Their
efforts were reportedly directed toward revisions of the principles
approved by the PCC as the basis for revising the Draft Constitution
and toward obtaining close adherence to the May 1936 Draft Consti-
tution, on which the Kuomintang had originally insisted in the PCC
sessions.

Discussions regarding the PCC resolutions continued in the PCC
Steering Committee after the adjournment of the Kuomintang CEC
on March 17. During this period the Communist Party and Demo-
cratic League representatives maintained the general position that the
PCC resolutions had been agreed upon by duly authorized representa-
tives of all parties and indicated that they would oppose any major
changes in the resolutions. The Communist Party and Democratic
League, therefore, refused to nominate members to the State Council
for participation in a reorganized government until the Kuomintang
should publish a statement of any revisions of the PCC resolutions
agreed upon and of a definite commitment by the Kuomintang to
implement the PCC program as revised. In the meantime, the Com-
munist Party postponed its Central Committee meeting, originally
scheduled for March 31 for the purpose of passing upon the PCC reso-
lutions. Under these circumstances the PCC Constitutional Review-
ing Committee suspended its w T ork upon preparation of a revised
constitution to submit to the National Assembly, still scheduled to meet
on May 5, but later postponed and not convened until November.

9 See annex 72.

THE MISSION OF GENERAL GEORGE C. MARSHALL 145

GENERAL MARSHALL’S RECALL FOR CONSULTATION

Following the signing of the military reorganization agreement
General Marshall had recommended to President Truman that he be
recalled to Washington for a brief visit. He felt that he should report
to the President on the situation in China and he was particularly
anxious to take up the question of the transfer of surplus property and
shipping and the problem of loans to China. He also wished to make
a personal presentation of the situation in China regarding Unrra
and famine conditions. He was of the opinion that he should make
a brief visit to obtain financial and economic facilities to aid China
and return to China in time to assist in adjusting differences which
were certain to arise over the major problems connected with the
agreements reached. It was his opinion that steps had to be taken
to assist China and its people in the increasingly serious economic
situation and to facilitate the efforts being made toward peace and
unity in China and toward the establishment of a unified defense
force. General Marshall felt that Chinese political and military unity
could only be consolidated and made lasting through the rehabilitation
of the country and the permanent general improvement of economic
conditions. President Truman approved the recommendation and
formally recalled him to Washington for these purposes. He accord-
ingly departed for Washington on March 11, 1946.

III. THE MANCHURIAN CRISIS

FIELD TEAMS FOR MANCHURIA

The cease-fire agreement of January 10, 1946, made no mention
of any exemption of any part of China from its provisions, except
in regard to the movement of troops, and there was no implication
or indication in the meetings of the Committee of Three that Man-
churia was not included within the scope of the cessation of hostilities
order. General Marshall felt very strongly that the authority of the
Executive Headquarters in Manchuria should be asserted in order to
avoid possible future clashes and difficulties between the two opposing
Chinese forces if the Russian troops should withdraw from Man-
churia. The matter was complicated by the continued delay in the
withdrawal of Russian troops, resulting in suspicion on the part of the
National Government of Russian intentions and aims in Manchuria
and in the consequent inability of the National Government to assume
control in that area.

With these circumstances in mind and as a result of reports of fight-
ing at Yingkow, a port in south Manchuria, General Marshall pro-

146

U. S. RELATIONS WITH CHINA

posed on January 24, 1946, that an Executive Headquarters field team
be sent immediately to Yingkow and that in the event of future inci-
dents of this kind similar action be taken. 10 The National Govern-
ment was unwilling to agree to this proposal, although the Chinese
Communist Party gave its approval. On February 20 General Mar-
shall again, but without success, proposed that field teams be sent to
Manchuria, pointing out the need of such teams both in stopping
possible conflicts and in establishing a basis for the demobilization
of the armies under the plan for military reorganization and integra-
tion. While the Chinese Communist Party acquiesced in this pro-
posal, the National Government remained adamant in spite of a de-
terioration of the situation in Manchuria. At this stage the National
Government seemed determined to incur no restraints on its freedom
of action in Manchuria and appeared bent on a policy of complete
military occupation of the area and elimination of the Chinese Com-
munist forces if they were encountered, even though it did not have
the military capability of achieving these objectives.

It was not until March 11, the day of General Marshall’s departure
for Washington, that the Generalissimo finally agreed to the entry of
Executive Headquarters field teams into Manchuria, but with numer-
ous conditions stipulated, so that agreement on a directive for the
entry of the teams into Manchuria was not reached until March 27. * 11
This directive was not, however, sufficiently broad to enable the teams
to bring about a cessation of the fighting, which meanwhile was
developing into a dangerous situation for the National Government
forces.

In addition to this difficulty, there was a justified complaint by the
Chinese Communists that the National Government commander at
Canton had violated the terms of the cessation of hostilities order by
refusing to recognize the authority of the Executive Headquarters in
his area of command, and that the Supreme Headquarters of the
National Government armies at Nanking had failed to carry out the
specific stipulation of the cease-fire order to report all movements of
the National Government troops to the Executive Headquarters at
Peiping. There had been, of course, a number of minor infractions
of the cease-fire order by subordinate commanders on both sides.
There was also a difficult problem in the north Hupeh-south Honan
area where about 60,000 Communist troops, encircled by Government
troops, were having difficulty in obtaining food supplies.

The extended delay in the sending of teams to Manchuria, caused
first by the National Government’s refusal to give its approval for such

10 See annex 73.

11 See annex 74.

THE MISSION OF GENERAL GEORGE C. MARSHALL 147

action and later by the inability of the two Chinese representatives to
agree on a suitable directive for the teams, had already resulted in a
serious situation. The Chinese Communist Party in Manchuria was
steadily extending the area of its control. The Russian withdrawal
from Manchuria, originally scheduled to be completed by December 3,
1945, had been postponed until February 1, 1946, in accordance with
an agreement between the Chinese and Soviet Governments. In early
March, however, the Chinese Government formally requested the with-
drawal of the Russian forces from Manchuria. Subsequent to this
request, the Soviet Government agreed to the progressive and com-
plete withdrawal of its armies beginning on April 6 and ending on
April 29. When the Russian troops did withdraw toward the north,
the National Government found itself with extended lines of com-
munication and limited railroad rolling stock. Although it had ap-
proximately 137,000 troops in Manchuria and the adjoining areas of
Jehol Province by mid-March, these were insufficient to move into all
the areas evacuated by the Russian armies in time to prevent their
occupation by the Chinese Communists. The Chinese Communist
forces were moving both into areas from which Russian troops were
withdrawing and into the hinterland between the lines of communica-
tion where there had been no occupation forces. The movement
of National Government troops into and within Manchuria for the
purpose of restoring Chinese sovereignty had been provided for in
the cease-fire agreement. The entry of the Chinese Government forces
had, however, been seriously impeded by the Russian refusal to permit
their use of Dairen as the port of entry and their continued advance
subsequent to their entry had been blocked by the delay in the Russian
withdrawal. This delay also had the effect of giving the Chinese
Communists time to build up their forces in Manchuria, which had
apparently been reinforced by the movement of hastily organized or
reinforced units from Chahar and Jehol Provinces. While these
movements had begun in August and September 1945, there was
evidence of the unauthorized continuation of the movement after J an-
uary 13, 1946. Chinese Communist political infiltration was also
facilitated by the delayed Russian withdrawal. In addition, the
Chinese Communists were enabled to take over and put into use among
their troops stores of weapons and military supplies possessed by the
Japanese at the time of their surrender and made available directly
or indirectly by the Russians.

Further delay and increased distrust between the National Govern-
ment and the Chinese Communists had resulted from the actions of
the National Government commander in Manchuria in seeking to
establish military control in the rural areas removed from the main

148

U. S. RELATIONS WITH CHINA

lines of communication, there being no Executive Headquarters field
teams to moderate or regulate the procedure where National Govern-
ment and Chinese Communist forces were in contact. These tactics
had brought him in violent conflict with Chinese Communist forces in
the hinterland, who were thus in a position to level the accusation
that his chief aim was to eliminate their forces rather than to restore
Chinese sovereignty in Manchuria.

This situation made a solution of the political impasse immeasurably
more difficult, as it created considerable misgivings among the Chinese
with regard to the relationship of the Chinese Communists to the Soviet
Union and strengthened the position of irreconcilable elements within
the Kuomintang, which would have been opposed to the political solu-
tion offered by the PCC resolutions under any circumstances. The sit-
uation in Manchuria, however, presented them with a plausible excuse
for resisting any limitation of Kuomintang governmental authority
under such circumstances. Chinese Communist resentment and sus-
picions, in turn, were aroused by the obvious intention of the National
Government to assume complete military and political control in Man-
churia through new administrative appointees for Manchurian posts
from among the most anti-Communist elements in the Kuomintang.

In spite of the deterioration in the general situation, agreement was
reached in the PCC Steering Committee on April 1 in regard to the
National Assembly. Following this agreement, however, subsequent
meetings of the PCC Steering Committee ended in a virtual stalemate
and, with the worsening of the situation in Manchuria, it became
apparent that no real settlement of governmental and constitutional
questions in China could be reached so long as the Manchurian problem
remained unsolved. This meant an indefinite postponement of the
National Assembly, originally scheduled for May 5. Matters were
further complicated by the continued refusal of the Chinese Commun-
ist Party to submit a complete list of its military units in accordance
with the Military Reorganization Agreement of February 25.

In spite of agreement authorizing the entry of Executive Head-
quarters field teams into Manchuria, the National Government offered
obstructions to the functioning of the teams, first by the refusal of the
Commanding General in Manchuria to permit the teams to enter Man-
churia and later by the refusal of the National Government members
of the teams to take any action on the basis that they had no authority.
It was not until April 8 that the field teams proceeded to areas of
conflict in Manchuria, where the situation was complicated by develop-
ments connected with the Russian withdrawal. Subsequent to their
withdrawal from Mukden, for example, the Russian military authori-
ties refused to approve the National Government’s use of the rail line

THE MISSION OF GENERAL GEORGE C. MARSHALL 149

north toward Changchun for the transportation of Chinese troops,
alleging that it was prohibited by the terms of the Sino-Soviet Treaty
of August 1945. It was also reported that the Russian authorities had
rejected a request by the Chinese Government for the retention of
small Russian garrisons in the points then being evacuated by Russian
troops until the National Government’s troops should arrive to take
over sovereignty at such places.

Another phase of the Manchurian situation, one which was the sub-
ject of frequent propaganda attacks by the Chinese Communist Party,
was the transportation of National Government troops by American
facilities. On March 31 the Chinese Communists protested the further
transportation of Chinese Government armies into Manchuria by
American vessels on the ground that the military reorganization plan
of February 25 restricted the number of Government troops in Man-
churia to 5 armies. It was pointed out to General Chou En-lai that
the limitation of Government troops in Manchuria, set forth in the
military reorganization plan, was not to be effective until the end of 12
months and that the movement of National Government armies into
Manchuria had been authorized by the cessation of hostilities order
of J anuary 10.

CHINESE COMMUNIST OCCUPATION OF CHANGCHUN

On April 15, 1946, the day after the withdrawal of Russian troops
from Changchun, the Chinese Communist forces attacked the city,
and occupied it on April 18. This action was a flagrant violation of
the cessation of hostilities order and an act which was to have serious
consequences. It made the victorious Chinese Communist generals
in Manchuria overconfident and less amenable to compromise, but
even more disastrous was the effect upon the National Government.
It greatly strengthened the hand of the ultra-reactionary groups
in the Government, which were then in a position to say that the
Communists had demonstrated that they never intended to carry out
their agreements.

At the time of General Marshall’s return to China on April 18,
the impasse was complete, except that the Chinese Communists were
willing to submit the future military dispositions and local political
reorganization to negotiations if the fighting were terminated. The
National Government declined such compromises, on the grounds that
the cessation of hostilities order clearly gave National Government
troops the right to proceed anywhere in Manchuria necessary to estab-
lish sovereignty, and stated that negotiations regarding political ques-
tions would be considered only after sovereignty had been established
along the railway mentioned in the Sino-Soviet Treaty of August

150

U. S. RELATIONS WITH CHINA

1945. The Government was militarily powerless, however, to enforce
such demands. General Marshall submitted a proposal to the Gen-
eralissimo in keeping with what he believed to be the Generalissimo s
view that the Government could not and would not advance farther
north, but discovered that the Generalissimo had in mind the use of
force to occupy Changchun and overpower the Chinese Communist
troops in that region.

At the beginning of May the Generalissimo finally came to the point
of proposing the same conditions for a settlement of the Manchurian
problems that the Chinese Communists had actually proposed about
six weeks earlier, before the Communists had captured Changchun.
It was also demanded that Chinese Communist forces evacuate Chang-
chun and permit Government troops to occupy it, indicating that
following the occupation of Changchun negotiations would begin
regarding military dispositions and political reorganization.

The successful Chinese Communist commanders in the Changchun
region, however, had been strengthened by their acquisition of Jap-
anese military equipment and stores, including medium artillery
and tanks, while the National Government’s military position grew
weaker as its forces advanced, owing to the great distances over
which its troops had to move in proceeding northward. The
Chinese Communists therefore did not accept the Government’s
terms and General Chou En-lai urged General Marshall to with-
draw shipping support from the National Government armies in
order to force the hand of the Generalissimo. The Generalis-
simo’s advisers were urging a policy of force which they were not
capable of carrying out, even with American logistical support
and the presence of United States Marines in the North China ports
of Tsingtao and Tientsin and up the railway line toward the port
of Chinhuangtao, from which the coal essential for the industries of
the lower Yangtze Valley area was shipped south.

GENERAL MARSHALL’S APPRAISAL OF THE SITUATION

In conversations with National Government leaders General Mar-
shall endeavored to emphasize the seriousness of the situation. He
pointed out that many of the existing difficulties could have been
avoided earlier by the National Government but that the situation
was now reversed ; that there was a complete lack of faith and a feeling
of distrust on both sides and that each side saw behind all proposals
from the other an evil motive; that the National Government had
blocked the sending of field teams into Manchuria which might have
been able to control the situation; that while the Communists said
that the cessation of hostilities order of January 10 applied to all of

THE MISSION OF GENERAL GEORGE C. MARSHALL 151

China, the National Government resisted its application to Man-
churia; that when the National Government troops moved into Man-
churia they attempted to destroy the Chinese Communist forces in the
hinterland ; and that the Generalissimo’s military advisers had shown
very poor judgment. He continued that in many instances the Na-
tional Government authorities had offered opportunities to the Com-
munist Party to make accusations against their good faith: (1) the
situation north of Hankow, where Communist troops were surrounded
by large Government concentrations; (2) the movement of Govern-
ment troops toward Chihfeng, Jehol Province, under orders issued
by the National Government military headquarters at Chungking in
violation of the cease-fire order; (3) the refusal of the Commanding
General at Canton to recognize the existence of Communist troops in
that area as well as the orders of the Executive Headquarters and the
National Government at Chungking regarding Executive Headquar-
ters’ investigation of the situation in this area; (4) the failure of
the National Government Army Headquarters to submit daily reports
of its troop movements south of the Yangtze River, as was clearly
required by the cessation of hostilities order; (5) the search of homes
of Chinese Communist Party personnel and closure of Chinese Com-
munist newspaper offices at Peiping; (6) the “buzzing” of the air-
field at Yenan by National Government planes; and ( 7 ) the detention
of Chinese Communist field team personnel at the airfield at Mukden.
General Marshall characterized these acts as stupid actions of no ben-
efit to the National Government, which not only served as ammuni-
tion to the Chinese Communists, but, what was far more serious, stimu-
lated their suspicion of Government intentions. He said that the
Kuomintang had had an opportunity to have peace in Manchuria but
had not utilized the opportunity, and concluded that the Chinese Com-
munists were now taking advantage of the existing situation and were
becoming stronger daily, thus placing the National Government in
a very dangerous military position with over-extended lines and a
constantly increasing dispersion of forces.

The reaction of the Chinese Communists was revealed by their desire
to change the ratio of military strength in Manchuria. General Chou
En-lai informed General Marshall that the Communist Party wished
to revise the ratio of 1 Communist division to 14 Government divi-
sions in Manchuria provided for in the military reorganization agree-
ment at the end of 18 months, and was adamantly opposed to the
movement of additional Government troops in Manchuria. General
Marshall explained that, when the United States had completed the
movement of the seven National Government armies into Manchuria
which it was committed to transport to that area, a total of 228,000

152

U. S. RELATIONS WITH CHINA

Government troops would have been moved by American facilities.
However, the total National Government strength at the end of 12
months authorized for Manchuria in the military reorganization
agreement would be approximately 240,000 men.

In further discussions with General Chou En-lai, General Marshall
stated that in his opinion the fundamental difference between the
positions of the two sides lay in the question of sovereignty in Man-
churia; that sovereignty implied control and control could not be held
by the National Government unless it occupied Changchun; and that
the Generalissimo had made a significant concession to the Chinese
Communists by his willingness to hold open for negotiation problems
relating to the remainder of Manchuria provided the Communist
forces evacuated Changchun. He further stated that he had done his
best in an effort to negotiate this critical problem but that the matter
had virtually passed out of his hands. He added that he did not see
that he could accomplish anything more through mediation, since at
that time his position in endeavoring to persuade the Government
to take various actions had been heavily compromised by the Com-
munist attack on Changchun.

GENERAL MARSHALL’S TEMPORARY WITHDRAWAL FROM
MEDIATION

At this point General Marshall withdrew from formal mediation
between the two parties for a settlement of the Manchurian problem.
He did, however, continue to hold separate conferences with repre-
sentatives of the two sides and to act as a channel of communication
between them. The diminishing effectiveness of the Executive Head-
quarters field teams was a matter of particular concern at this time.
Executive Headquarters reports during this period revealed the com-
plete opposition of the Communist members, at the operations level in
the Headquarters and in the field teams, toward any common sense
action which should be taken by the teams. United States Army
officers had originally been impressed by the high degree of coopera-
tion by the Communists, but the Communist tactics of blocking action
had lowered American confidence in their sincerity. In view of these
difficulties the Committee of Three discussed the matter and on May
14 reached agreement on a document designed to ensure more prompt
investigation of reported violations of the cessation of hostilities
order. 12

During his discussions with National Government leaders, General
Marshall continued to point out that the time element was of great im-
portance. The situation in North China was becoming more serious

12

See annex 75.

THE MISSION OF GENERAL GEORGE C. MARSHALL 153

with two major irritants affecting the situation there — the unsettled
question of the destruction of railway fortifications and the failure of
the National Government to report its routine troop movements to the
Executive Headquarters. The situation, in North China was, of
course, dominated by the outcome in Manchuria, and continued failure
to find a solution in Manchuria would probably make the Executive
Headquarters completely ineffective. A solution was made more dif-
ficult by the repeated insistence of the Generalissimo in discussions
with General Marshall that he would not sign or agree to any settle-
ment that did not provide for evacuation of Changchun by the Com-
munists and its occupation by the Government and that he would
accept nothing less than complete National Government sovereignty
in Manchuria. Under these circumstances General Marshall con-
sidered it unwise for him to re-enter the negotiations in the capacity
of mediator, since there was no basis for agreement by the Chinese
Communist Party and he did not wish to be placed in a position where
he would have no power to avert an otherwise certain stalemate.

SUGGESTED COMPROMISE SOLUTION

At the request of the Generalissimo for his views General Mar-
shall suggested that a compromise solution of the Manchurian issues
be reached which would provide for Communist withdrawal from
Changchun and the establishment of an advance echelon of the Execu-
tive Headquarters at that city as a basis for terminating the fighting
preliminary to entering into negotiations. This solution would also
envisage the occupation of Changchun by the Government troops with-
in a maximum time of six months, preferably much sooner. General
Marshall’s conclusions as communicated to the Generalissimo, were as
follows :

The Government’s military position was weak in Manchuria and
the Communists had the strategical advantage there. The psycho-
logical effect of a compromise on the part of the Government to
achieve peace would not injure its prestige but would indicate that the
Generalissimo was making every effort to promote peace. The pro-
posal to utilize the Executive Headquarters in Changchun would bol-
ster the conviction that the Generalissimo was striving for peace.
Finally some compromise must be reached as quickly as possible or
China would be faced with a chaotic situation, militarily, financially
and economically.

General Marshall suggested the same general solution on May 13
to General Chou En-lai, who said that he would transmit the proposal
to Yenan. General Marshall emphasized that, unless he could be
reasonably certain of the position of the Communist Party on military

154

U. S. RELATIONS WITH CHINA

and political issues, it would be impossible for him to resume the role
of mediator and that he could not again place himself in the position
of being a party to an agreement which included provision for
negotiations regarding vital or fundamental differences unless he had
reasonable assurance of a favorable outcome. The Chinese Com-
munist reply to this proposal indicated apprehension that the Govern-
ment might raise the question of other cities, such as Harbin, once it
occupied Changchun. The Communists also stated that they desired
to have five divisions in Manchuria instead of the one division author-
ized in the military reorganization agreement.

Daily discussions between the Generalissimo and General Marshall
were held at this time regarding the detailed terms for a military set-
tlement, the redistribution of troops as a condition precedent to the
issuance of a cease-fire order, and tentative arrangements whereby
the Communists would voluntarily evacuate Changchun and an ad-
vance section of the Executive Headquarters would assume control
of the city, pending a further settlement of problems relating to
Changchun and the areas north of that city. On May 22 the
Generalissimo informed General Marshall that he had not heard from
his military commanders in Manchuria for three days and that he
feared that following their capture of Ssupingchieh on May 19 (after
fighting lasting over a month) they were advancing toward Chang-
chun. The Generalissimo expressed agreement with General Mar-
shall’s view that occupation of Changchun at a time when the basis
of an agreement with the Communists was practically completed
would be inadvisable and said that he was leaving for Mukden on
May 24 in order to keep control of the situation. General Marshall
pointed out the danger of a delay and expressed the hope that the
Generalissimo would return as soon as possible in order that the
negotiations could be carried to completion. Generalissimo Chiang
Kai-shek departed for Mukden on May 23, his departure on this
11-day trip being the first of a chain of events which were almost
completely disastrous in their effect on the situation. The fact that
the Generalissimo requested and received the use of General Mar-
shall’s official airplane for the trip served to heighten the public im-
pression of General Marshall’s close connection with the trip and to
add to the embarrassment that later developed.

On May 23 General Marshall conveyed to General Chou En-lai three
points set forth by the Generalissimo prior to his departure as con-
ditions precedent to any general agreement: (1) The Chinese Com-
munist Party must make every effort to facilitate the restoration of
communications; (2) in any agreement regarding Manchurian issues,
provision must be made for carrrying out the military demobilization

THE MISSION OF GENERAL GEORGE C. MARSHALL 155

and reorganization plan within specified dates; and (3) the Generalis-
simo would not commit himself to further agreements without tin
understanding that when field teams or high staff groups reached an
impasse, the final decision would be left to the American member.
General Marshall also asked General Chou En-lai whether the Com-
munist Party would agree to the proposal for the evacuation of
Changchun by the Communist troops, the entry into Changchun of the
advance section of the Executive Headquarters, and the cessation of
further advances of Government troops.

General Chou En-lai stated that the Communist Party would agree
to the three proposals suggested by General Marshall but that the
Generalissimo’s three conditions were new. He added that he would
endeavor to solve the communications problem with the National
Government representative and that he had no objection to the second
condition. With respect to authority for decision by American mem-
bers, he said that this would have to be discussed with his associates.

NATIONAL GOVERNMENT CAPTURE OF CHANGCHUN

On May 23 the National Government’s forces entered Changchun,
following a Communist withdrawal from that city and little or no
opposition from the Communist forces after the Government capture
of Ssupingchieh on May 19. The absence of the Generalissimo from
Nanking and the difficulty of communication with him by General
Marshall made for an extremely unsatisfactory situation at a most
critical moment. The Generalissimo’s presence in Mukden at the
time of the capture of Changchun conveyed the impression of a
journey timed to coincide with a previously planned military triumph,
and public pronouncements by the Generalissimo in Mukden tended
to heighten this impression. In spite of General Marshall’s appeals
by radio for the issuance of an order for the cessation of offensive
operations, the Generalissimo took no action toward that end, although
his earlier insistence had been on the evacuation of Changchun and its
occupation by Government forces as a precedent to further negotiation
and the issuance of a cease-fire order. To make matters more serious,
the Government troops, after their occupation of Changchun, con-
tinued to advance north along the rail line toward Harbin and toward
Kirin to the east, and the result was to increase Communist suspicion
and distrust of Government promises and to place General Marshall’s
impartial position as a possible mediator in a questionable light insofar
as the Communists were concerned. The positions were now reversed.
Where formerly difficulties arose from the Communist attack on
Changchun in open violation of the cease-fire order and the consequent
stronger stand taken by the Chinese Communist generals in Man-

156

U. S. RELATIONS WITH CHINA

cliuria, the new situation played directly into the hands of the National
Government military commanders in Manchuria, who now felt certain
that they could settle the problem by force and were therefore disin-
clined to compromise with the Communists.

GENERALISSIMO CHIANG’S PROPOSALS OF MAY 24, 1946

On May 24 the Generalissimo forwarded to General Marshall from
Mukden his formal conditions for the restoration of peace. He
demanded the execution of the cessation of hostilities agreement of
January 10, which specifically related to freedom of action for the
Nanking Government in taking over sovereignty in Manchuria, and
of the agreement for military reorganization of February 25. The
Generalissimo placed first importance on a Communist demonstration
of good faith by permitting National Government agencies to restore
communications in North China and stipulated again that in the Exec-
utive Headquarters and its field teams American members should cast
the deciding vote. He also asked General Marshall whether he would
guarantee Communist good faith in carrying out agreements. No
mention was made by the Generalissimo of his intention or willingness
to issue an order halting troop movements or to agree to the establish-
ment of an advance section of the Executive Headquarters at Chang-
chun, both of which had been proposed by General Marshall at the
time of the Generalissimo’s departure for Mukden with the suggestion
that the Generalissimo might reach a decision while in Mukden and
inform General Marshall.

General Marshall, therefore, dispatched a message to the General-
issimo at Mukden requesting explanatory details regarding his general
statements, proposing the immediate movement of a section of the
Executive Headquarters to Changchun and urging him to issue an
order immediately directing the cessation of attacks, pursuits, or
advances while the details of a truce were being arranged. General
Marshall urged him to avoid the painful results of previous mistakes
in forging ahead in Manchuria without granting permission for the
presence of field teams to prevent unnecessary skirmishing and the
more recent unfortunate results of the attitude of the belligerent
Chinese Communist commanders at Changchun. General Marshall
also asked for an explanation of the meaning of the Generalissimo’s
use of the word “guarantee” in reference to General Marshall’s role.

On May 28 the Generalissimo again communicated with General
Marshall, repeating the terms previously set forth but agreeing to a
qualification General Marshall had suggested regarding the power of
decision of Americans in the Executive Headquarters and its field
teams. The Generalissimo also stated that, with respect to the

THE MISSION OF GENERAL GEORGE C. MARSHALL 157

method of recovering sovereignty in Manchuria, the National Govern-
ment could not abandon the taking over of administration in any area,
but might agree to send forward, after military advances had ceased,
only administrative officials and such military and police forces as
would be absolutely necessary for the maintenance of local order and
communications. He explained that, by use of the word “guarantee,”
he meant that General Marshall would set time limits for putting into
effect all agreements which General Marshall had signed and would
assume the responsibility of supervision over the strict observance of
such agreements on the part of the Chinese Communists.

Not having received this second message from the Generalissimo, on
May 29 General Marshall sent a further message to the Generalissimo
at Mukden, informing him that the continued advances of the National
Government troops in Manchuria in the absence of any action to ter-
minate the fighting, other than the terms indicated by him in his first
message from Mukden, was making General Marshall’s services as a
possible mediator extremely difficult and might soon make them virtu-
ally impossible. No reply having been received to this message, 13 Gen-
eral Marshall dispatched an additional message to the Generalissimo on
May 31 at Peiping, where the latter had just arrived, repeating the
substance of his previous message and stating that a point was being
reached where the integrity of his position was open to serious ques-
tion. General Marshall again requested the Generalissimo, therefore,
to issue immediately an order terminating advances, attacks or pur-
suits by the National Government troops and to authorize the im-
mediate departure of an advance section of the Executive Head-
quarters to Changchun.

In a message of June 1 from Peiping the Generalissimo informed
General Marshall that in all decisions he had kept in mind the diffi-
culty of General Marshall’s position and was doing everything in his
power to facilitate and assure the success of his work. He said that
he was prepared to agree to the proposal to send an advance section
of the Executive Headquarters to Changchun in the event of his not
being able immediately to issue orders to National Government troops
to terminate their advance.

During this period General Marshall continued to have conferences
with General Chou En-lai, National Government leaders, and repre-
sentatives of the minority parties. These representatives had offered
certain proposals for settlement of the Manchurian problem, but they
were not approved by either the National Government or the Chinese
Communist Party.

13 It later developed that General Marshall’s message of May 29 had missed
the 'Generalissimo in Mukden and was long delayed in delivery.

158 U. S. RELATIONS WITH CHINA

ARRANGEMENTS FOR A TRUCE

On June 3 the Generalissimo returned to Nanking. A discussion
of the situation with General Marshall indicated that a misunder-
standing on the part of the Generalissimo caused by mistranslation of
General Marshall’s message had prevented the immediate establish-
ment of an advance section of the Executive Headquarters in Chang-
chun. General Marshall, therefore, immediately directed its estab-
lishment. The Generalissimo agreed to issue an order to his armies
in Manchuria to cease advances, attacks or pursuits — in other words,
aggressive action — for a period of ten days to afford the Communists
an opportunity to prove their sincerity by completing negotiations
with the National Government during that period on the following
points: (1) detailed arrangements to govern a complete termination
of hostilities in Manchuria; (2) definite detailed arrangements, with
time limits, for the complete resumption of communications in North
China; and (3) a basis for carrying out without further delay the
agreement for military reorganization of February 25.

The Generalissimo first stipulated one week in which to complete
these negotiations but finally agreed to a period of 10 days. He in-
formed General Marshall that this would be his final effort at doing
business with the Communists, that the present indeterminate situa-
tion with communications blocked, coal barely obtainable in sufficient
quantities, and cities starving, could not be endured economically or
otherwise, and that all-out war would be preferable.

When the Generalissimo’s terms were presented to General Chou
En-lai by General Marshall, General Chou immediately asked for an
extension of the 10 days to one month but finally reduced his request
to 15 days on the ground that there were many complicated plans to
be agreed to and General Chou would have to fly to Yenan at least
once for conferences with Chinese Communist leaders.

On June 6 the Generalissimo and the Chinese Communist Party
issued separate announcements of orders halting advances, attacks, or
pursuits by their troops in Manchuria for a 15-day period beginning
at noon on June 7. 13a They also announced that during this period
agreements were to be reached regarding arrangements for the com-
plete termination of hostilities in Manchuria, complete resumption .of
communications in China, and execution without delay of the agree-
ment for military reorganization of February 25.

Constant negotiations followed the promulgation of these orders.
General Chou En-lai consulted the Communist leaders in Yenan and
returned to Nanking for discussions. An agreement for the resump-

131 See annex 76.

THE MISSION OF GENERAL GEORGE C. MARSHALL 159

tion of communications was reached after detailed discussions. 14
Little trouble was anticipated in reaching agreement on the detailed
arrangements for formal termination of hostilities in Manchuria. The
great difficulties to be resolved related to demobilization, reorganiza-
tion, and particularly redistribution of troops, especially in Man-
churia and Shantung Province. General Marshall’s problems during
this period also related to sporadic but violent fighting in various
localities, mostly in North China, which could not be halted on short
notice, since many of the actions had evidently been planned and
ordered a week or more in advance.

The rather virulent Communist propaganda attacks against the
United States and the alleged support by General Marshall of the
National Government in the fighting at this time were due to a con-
tinuation of an effort (1) to arouse American opposition to any mili-
tary representation in China and (2) to offset in the United States
the effect of the Generalissimo’s proposal to give American officers
the deciding vote in case of disagreements. The fact that just as
an agreement seemed to be on the verge of being reached the Generalis-
simo remained absent in Mukden and Peiping for a considerable period
while his armies exploited their successful action south of Changchun
aroused great suspicion against his good faith and particularly
against the impartiality of General Marshall’s attitude, since General
Marshall had advanced proposals to the Chinese Communists for
Communist evacuation of Changchun and the cessation of further
advances by National Government troops which the Communists had
accepted.

NEGOTIATIONS DURING THE TRUCE PERIOD

Negotiations during the truce period proceeded very slowly, due to
the reluctance of either side to commit itself in advance of the other
regarding reorganization and particularly redistribution of troops.
Fighting in Shantung Province, arising from a Communist offensive
at the beginning of the truce period and lasting for about a week,
proved to be a very disturbing factor, causing increased bitterness and
unwillingness to make concessions.

Several members of the PCC asked General Marshall to suggest the
convening of the PCC Steering Committee at this time to work
simultaneously on political problems while the Committee of Three
handled the military problems. General Marshall informed them
that this did not come within the scope of his authority. The General-
issimo had often said that he would not negotiate on political problems

14 See annex 77.

160

V . S. RELATIONS WITH CHINA

until he had occupied Manchuria. He had, however, later said that
after Government occupation of Changchun he would be prepared to
negotiate both political and military questions. General Chou En-lai
indicated that it would be preferable to omit discussion of political
matters and to preserve the status quo in the various areas. He pointed
out to General Marshall that, although the latter had been reluctant to
accept the Generalissimo’s proposal that the Committee of Three be
empowered to solve administrative problems, he felt that this matter
should be given further consideration. He added that, since General
Marshall did not wish to be involved in political decisions, the problem
could be solved by action to be taken by the reorganized Government.

On June 17 the Generalissimo indicated to General Marshall, for
transmission to General Chou En-lai, the nature of his demands. The
National Government proposals required the evacuation of Chinese
Communist forces from Jehol and Chahar Provinces before September
1, 1946 ; the occupation by Government forces of Chefoo and Weihai-
wai in Shantung Province; the reinforcement of Tsingtao with one
National Government army to permit the withdrawal of the United
States Marines stationed at that city ; the evacuation by the Chinese
Communists before July 1, 1946, of all localities in Shantung Province
forcibly occupied by Communist troops after noon of June 7, 1946;
the immediate occupation of these localities by Government garrisons ;
and the reinforcement of the Tientsin region by one Government army,
commencing September 1, 1946, to permit the withdrawal of the
United States Marine forces in that area. With respect to Manchuria,
the National Government proposals provided for Government occupa-
tion of various points then held by Communist forces, such as Harbin,
Antung, Tunghwa, Mutankiang, and Paicheng.

General Chou En-lai, after preliminary study of these proposals, in-
formed General Marshall that they were entirely too demanding to
admit of acceptance by the Chinese Communist Party. He stated
that, except for the restoration of the status quo in Shantung Province
prior to June 7, none of the points could be considered, and pointed
out that the date of June 7 should be applied to Manchuria only, in
accordance with the orders issued by both sides halting advances,
attacks or pursuits by their troops in Manchuria, beginning on that
date, while the restoration of original positions in China proper should
be based on January 13, in accordance with the cessation of hostilities
order of January 10. General Marshall also discussed the situation
with the Generalissimo and told him that there seemed to be no
likelihood that the Chinese Communists would accept his terms without
considerable modification. General Marshall had suggested to General
Chou En-lai that he fly to Yenan to consult with the leaders of his

THE MISSION OF GENERAL GEORGE C. MARSHALL 161

party, but after General Chou held a conference with Nationalist
Government officials he stated that nothing had occurred in this
conference to justify a trip to Yenan.

The principal stumbling block presented by the National Govern-
ment proposals did not appear to be in regard to readjustments in
Manchuria. Communist resentment was more aroused by the Na-
tional Government stipulations regarding North China, which re-
quired Communist evacuation of provinces and cities then under their
occupation and subsequent entry of Government troops into these
areas.

The negotiations had again reached an impasse, and there remained
only a few days before the truce period would expire. The situation
was extremely critical and had not been helped throughout by the
belief, freely expressed by some of the National Government military
officers and politicians, that only a policy of force would satisfy the
situation and that the Chinese Communists could be quickly crushed.
General Marshall considered the latter view a gross underestimate of
the possibilities, as a long and terrible conflict would be unavoidable,
and conveyed his views to the Generalissimo on this subject.

At the suggestion of General Marshall, the Generalissimo agreed
to extend the truce period until noon of June 30 for the purpose of
permitting further time to negotiate matters referred to in his original
15-day truce order. At the same time the Generalissimo presented two
additional terms: (1) The Communists were to withdraw from the
Tsinan-Tsingtao Railway before August 1, 1946, and (2) the pro-
cedure of unanimous vote in the Committee of Three and the Ex-
ecutive Headquarters was to be revised before June 30, 1946.

Negotiations during the extended truce period proceeded in formal
meetings of the Committee of Three with some prospect of success.
These meetings marked the formal re-entry of General Marshall into
the negotiations as mediator. The Chinese Communists made conces-
sions in granting the deciding vote to Americans on teams and in
Executive Headquarters regarding matters pertaining to cessation of
hostilities procedures, interpretation of agreements, and their execu-
tion. This did not apply, however, to the Committee of Three, since
General Marshall thought that the United States Government should
not bear the heavy responsibility through his actions in regard to mat-
ters of great importance beyond the interpretation of agreements.

It was difficult to predict the rate of progress and eventual outcome
because of the effect of heavy sporadic fighting, the carelessly expressed
desire of some important Government leaders to settle issues by force,
unfortunate propaganda, and mutual suspicion and distrust

162

U. S. RELATIONS WITH CHINA

On June 24, the Committee of Three reached agreement on a docu-
ment entitled “Stipulations for the Resolution of Certain Disagree-
ments among the Field and Communication Teams, and Executive
Headquarters in Changchun and Peiping.’ 5 15 Under this agreement
certain authority was granted to American officers on teams and at the
Executive Headquarters which was expected to facilitate greatly con-
trol of the situation in areas of hostilities in the future. The most
difficult problem was that of redisposition and reduction of troops
in Manchuria and North and Central China. The Manchurian phase
then seemed to be the least difficult to compose.

CESSATION OF HOSTILITIES IN MANCHURIA

By June 26 an agreement had been reached in the Committee of
Three for the cessation of hostilities in Manchuria, entitled “Direc-
tive for the Termination of Hostilities in Manchuria.” 16 This Di-
rective provided for the application to Manchuria of the cessation of
hostilities agreement of January 10, except as modified in the Directive
or later by the Committee of Three; for the separation from contact
of troops in close or hostile contact; for the readjustment of troops
on the basis of the situation believed to have existed at noon of June
7, 1946; for the cessation of all tactical movements; for the punish-
ment of commanders who failed to carry out the terms of the Directive ;
and for the submission by both sides to the Advance Section of the
Executive Headquarters, within 15 days of the effective date of the
Directive, of lists of all units, strengths and locations in Manchuria.

Agreement on this document marked the settlement of the second
of the three major issues to be decided during the 15-day truce period,
which had now been extended to June 30. It was understood, how-
ever, that agreements on individual issues would not be operative unless
agreement on all major issues was reached in accordance with a stipu-
lation to that effect by the Generalissimo.

REVISION OF THE MILITARY REORGANIZATION AGREEMENT AND
RELATED POLITICAL PROBLEMS

When the discussions revealed the impossibility of reaching agree-
ment for revision of the basic military reorganization agreement of
February 25 prior to the expiration of the extended truce period, nego-
tiations were centered on a preliminary agreement covering only the
principal issues, with the understanding that formal revision would
be negotiated after the completion of the preliminary document.

“ See annex 78.

18 See annex 79.

THE MISSION OF GENERAL GEORGE C. MARSHALL

163

The question of troop dispositions was complicated by the fact that
little demobilization had taken place in North China. The National
Government had confined its demobilization to South and West China
and further demobilization would be largely confined to North China
and Manchuria. This National Government demobilization had been
carried out by reducing divisions which lacked full strength to
brigades, the officer personnel of divisions headquarters and head-
quarters troops having been demobilized. The real point was that
under the present Government proposals very heavy troop demobili-
zation on both sides would be involved between July 1, 1946, and
January 1, 1947.

On June 21, General Chou En-lai had stated that the Chinese
Communist Party proposed that: (1) the Committee of Three should
immediately stop the fighting in Manchuria and China proper and a
new order for the termination of hostilities should be issued with the
additional stipulation that American members of field teams should
have the power to execute this order and to decide upon investigations
to be made by the teams; (2) after the cessation of fighting, the
Committee of Three should work out a plan for the restoration of
communications and the Chinese Communists pledged that the repair
of railways would have first priority; (3) after the cessation of hos-
tilities, the Committee should work out arrangements for the re-
organization and demobilization of armies in all China, including
Manchuria, and the staffs of both parties under the leadership of the
American staff should work out a plan for the Committee of Three’s
approval; and (4) a second session of the Committee of Three should
be convened to discuss the reorganization of the Government, the
protection of the people’s rights and a solution of the people’s liveli-
hood, and local governments should be reorganized and elections held.
General Chou expressed the belief that the Generalissimo was most
concerned over the problems of army reorganization, integration, and
training and pointed out that the Generalissimo presented demands in
connection with these problems which caused concern to the Chinese
Communist Party because if the Chinese Communist Party accepted
these demands there would still be no assurances on the many other
problems which had not been discussed. General Chou considered
this the crucial point at issue. He suggested, therefore, that during
the period of army reorganization the Communist troops be reor-
ganized in Communist areas and Government troops in Government
territory and that training be carried out by American officers, who,
he said, were trusted by both sides, the two forces to be brought
together and integrated after this interim period.

164

U. S. RELATIONS WITH CHINA

General Marshall pointed out to General Chou that the Generalis-
simo had stated very clearly, in his announcement of the truce
period on June 6, that a basis should be established for carrying
out without further delay the agreement of February 25 for the
demobilization, reorganization and integration of Chinese armies
and that the Generalissimo had this in mind when he presented his
proposals. General Marshall emphasized that there must be a definite
understanding of Chinese Communist demands regarding the re-
distribution of troops in North China and that this should have been
decided upon in March and April, when the Chinese Communists
were to have submitted a list of their troops for demobilization. He
continued that the National Government had submitted such lists
but the Communist Party had not done so. In the absence of these
lists, the staffs had been unable to draw up a plan for troop redistribu-
tion in North China.

After learning of the decision of the Generalissimo to extend the
truce period, General Chou En-lai agreed to include the questions
of redistribution of troops in North and Central China in the agenda
for discussion since this problem was the greatest gap between the
two parties. In conversations on this subject, General Marshall
pointed out that when General Chou referred to the attitude of
Government military commanders in Manchuria, he should remember
General Marshall’s statements about the Chinese Communist generals
in Manchuria at the time of their occupation of Changchun, and
that he should also remember that he himself had frequently used
the expression “conditions have changed” in justifying some pro-
posal, just as this expression was now being used by the National
Government in presenting its new stipulations.

On June 26 General Marshall informed General Chou that the
Government, pursuant to the Communist Party demand, was willing
to agree to a revision of troop strengths in Manchuria to allow the
Communists to have 3 divisions as against the Government’s 15 divi-
sions but would not agree to 5 Communist divisions.

General Chou said that the Chinese Communist Party’s difficulty
was that, while it was entering into agreements on military matters,
it did not know what the Government attitude would be later in re-
gard to political questions. He then explained the views of the
Chinese Communist Party as follows :

Army units would have no connection with civil administration,
and after the reorganization of the Central Government and local
governments the Communist armies would be assembled in areas under
Communist control and Government armies in areas under its control.
The army would be separated from civil administration through the

THE MISSION OF GENERAL GEORGE C. MARSHALL 165

establishment of local self-government and elections. The Govern-
ment view that political administration should be adjusted accord-
ing to the identity of the troops in control of a particular area was a
violation of the principle of subordination of the army to civil ad-
ministration. Under the Government proposals, Government troops
would in many cases move into Communist areas and change the
civil administrations. The movement of Government armies into
Communist-held areas for the purpose of demobilization would mean
occupation of Communist territory through negotiation as a substitute
for occupation by force. This procedure was incompatible with the
PCC resolutions on this subject and with the general agreements. The
Communists were willing to withdraw from some areas in order to
erase Government fear of a Communist threat, but such areas should
be left ungarrisoned. Both Jehol and Shantung Provinces were
largely under Communist control and it was more logical to expect
the Government to evacuate these provinces than to demand that the
Communists do so.

On June 27 the Generalissimo told General Marshall that political
adjustments were at this time difficult, if not impossible, unless mili-
tary readjustments were effected as a means of avoiding clashes, and
presented specific proposals for such readjustments: The Chinese
Communist Party should, within ten days, evacuate north Kiangsu
Province, the Tsinan-Tsingtao Bailway, Chengte and Kupeikou, An-
tung Province, and Harbin, these places to be occupied by Government
troops within one month; the Communists should withdraw in one
month from other places to be evacuated, but the entry of Government
troops might be delayed for two or three months ; and as a compromise
measure, Communist officials in Hsin Heilungchiang, Hsingan, and
Nenchiang Provinces in Manchuria, and Chahar Province, might be
accepted by the Government as a temporary arrangement which would
receive consideration at the time of political reorganization.

In commenting upon the Generalissimo’s terms, General Chou En-lai
expressed the following views: Garrison troops must not interfere
with the local administration in areas where they were stationed.
While the Chinese Communist Party was willing to consider a read-
justment regarding Harbin and the detailed problems involved in
stationing Government and Communist troops in specified areas, it
was not in a position to accept the Government claim to the Tsinan-
Tsingtao Railway, Chengte, Kupeikou, and the other places. How-
ever, if the Government felt that the Communist forces along the rail
line in north Kiangsu and Shantung constituted a menace to the Gov-
ernment, the Communists were willing to reduce their forces in such
areas or withdraw them altogether, but the Government troops should

166

U. S. RELATIONS WITH CHINA

not enter Communist areas. The Communists were willing to garrison
north Kiangsu with a small force by reducing the number of troops
provided for in the military reorganization agreement of February 25.
They would withdraw their forces from the Tsinan-Tsingtao Railway
if the Government would agree to garrison only Tsinan, Weihsien, and
Tsingtao. All Communist troops would be withdrawn from the
Tsaochuang coal mines, leaving no garrison troops and freeing the
railway line for operation in connection with the coal mines, the latter
to be controlled by a committee established for that purpose. These
withdrawals should, however, in no way prejudice the local admin-
istrations established by the Communists in those areas.

Subsequent conversations on the subject of troop dispositions indi-
cated that the Government was adamant regarding its demand for the
withdrawal of Communist forces from Chengte and for the stationing
at Yenki of the Communist forces in eastern Manchuria and was
insistent on having sizable Government garrison troops in Harbin.
The Communist Party was equally adamant that areas to be evacuated
by the Communists during the period of army reorganization should
not be occupied by Government forces.

GENERAL MARSHALL’S DRAFT AGREEMENT ON THE ARMY REOR-
GANIZATION PLAN

After these discussions General Marshall drew up a draft pro-
posal entitled “Preliminary Agreement to Govern the Amendment
and Execution of the Army Reorganization Plan of February 25,
1946” 17 as a basis of discussion by the two Chinese sides with the
hope that agreement might be reached on this final document prior
to the expiration of the extended truce period on noon of June 30. As
stated in the document, it established conditions for the purpose of
committing the National Government and the Chinese Communist
Party to certain understandings in order to facilitate the preparation
and acceptance of the formal documents required and to permit the
immediate issuance of instructions for the final termination of hos-
tilities.

The chief points of this document were :

1. Provision for the specific disposition of Government and Commu-
nist troops, by definite localities, in Manchuria and China proper.

2. No change in 5-to-l ratio of troop strengths.

3. The previously established period of 12 months for the assign-
ment of troops to specified localities to be altered to 6 months.

4. The Executive Headquarters to determine immediately localities
occupied by Government and Communist forces in China proper since

17 See annex 80.

THE MISSION OF GENERAL GEORGE C. MARSHALL 167

January 13, 1946, and troops involved to evacuate such areas within
20 days, unless specifically directed otherwise.

5. The Executive Headquarters to determine immediate localities
occupied by Government and Communist forces in Manchuria after
noon of June 7, 1946, and troops involved to evacuate such areas
within 10 days unless specifically directed otherwise.

6. The Communist Party to agree to a Government garrison in
Harbin of 5,000 men.

7. The Communist Party to concentrate its troops in specified lo-
calities, Government troops not to move into areas vacated in China
proper and existing local governments and Peace Preservation Corps
for maintenance of local security to be continued.

An annex to this document specified areas in which Communist
troops were not to be garrisoned or concentrated, leaving for discussion
the time period within which these troops were to be withdrawn.

In commenting on this draft proposal, the Generalissimo expressed
unwillingness to confine paragraph 5 to Manchuria only. Regarding
paragraph 6, which dealt with the status of Harbin, he agreed to
appoint a civilian mayor and to name a person acceptable to the
Communist Party. In regard to paragraph 7 he first expressed
complete disapproval and his final attitude was not clearly indicated.
He agreed to Communist local governments, but could not accept
such an arrangement in Kiangsu Province because of the numerous
refugees, who, he said, would be mistreated by the existing local
governments. He accepted the idea of Peace Preservation Corps on
the basis of strengths similar to those of local security troops in a
hsien. The Generalissimo would not accept partial occupation by
the Government of north Kiangsu but insisted that the Communist
evacuation should be carried out as far north as Huaian within 6
weeks and, within 3 to 6 months, north of the Lunghai Railway. He
also stipulated that the Communist evacuation of the Tsinan-Tsingtao
Railway should include the coal mines along that line, particularly
Poshan (on a spur running south from Changtien) . He was unbending
in regard to the Communist evacuation of Chengte and said that the
Communists should evacuate areas in Jehol Province south of the
latitude of Chengte within 1 month and the city itself within 3 months.
He stipulated that Antung Province should be evacuated within 1
month and concluded that a paragraph should be added to the document
requiring the completion of amendments to the military reorganization
of February 25 within 10 days. In regard to the Manchuria Annex, 18
which had been presented to General Chou En-lai on June 17 with
National Government approval as an annex to the amendment of the

18 See annex 81.

168

U. S. RELATIONS WITH CHINA

agreement of February 25, the Generalissimo stated that the entire
demobilization and integration program in Manchuria should be
completed before November 1, 1946, the original document having
provided for its completion by January 1, 1947.

On June 29 General Chou En-lai commented as follows to General
Marshall on this document and the reservations of the Generalissimo
to the document: The Chinese Communist Party could not agree to
the Generalissimo’s desire to make an exception of north Kiangsu,
although it would be willing to station only minimum forces in that
area. Nor was the Communist Party in a position to accept the time
limits desired by the Generalissimo because it was not sufficiently
informed of actual conditions to know how much time would be
required to effect the concentration of Communist troops in the areas
indicated. He suggested, therefore, a period of 1 to 3 months — in
some cases it would require the minimum and in others more.

As Shantung Province was almost entirely under Communist occu-
pation, the Communists should have some cities on the Tientsin-
Pukow line if they withdrew entirely from the Tsinan-Tsingtao Rail-
way. Although the Communists had no intention of stationing troops
at the coal mines along the Tsinan-Tsingtao Railway, the stipulation
that they should give up all these coal mines was not acceptable in
principle. Further concessions regarding Chengte were impossible.
The Communists had made many concessions to the Government
without presenting any demands, except the proposal for an increase
of a few divisions in Manchuria, and he was asking Yenan for author-
ization to withdraw that proposal. Since he had previously thought
that the National Government’s demand regarding Antung referred
to the city rather than the Province, he would have to refer this ques-
tion to his colleagues in Manchuria before giving a reply.

After further discussion, General Chou said that he was prepared to
consider any formula except that for civil administration involving
the withdrawal of the Communist forces from north Kiangsu and
Government occupation of that region. He continued that the main
text of the document was almost entirely acceptable to the Communist
Party except for one or two minor points.

Thus the only important issue on which agreement had not been
reached at this time was the question of the status of the local govern-
ments in the areas from which the Chinese Communist forces would be
withdrawn. The settlement of this issue would virtually have assured
an agreement on the preliminary document for the amendment of the
military reorganization plan, which, in turn, would have led to the
signing of all the documents discussed during the June truce periods,

THE MISSION OF GENERAL GEORGE C. MARSHALL 169

the Generalissimo having stipulated that all the documents on which
agreement should be reached be signed simultaneously.

On the following day the Generalissimo indicated that he was will-
ing to compromise somewhat in the matter of Chengte but insisted that
the evacuation of Kiangsu by the Communists to the north of the
Lunghai Railway be completed within one month. General Marshall
pointed out that it would be impossible logistically to evacuate to the
north of the Lunghai line in one month and that the most serious
factor was the Communist insistence on the continuation of the local
administrations and a Peace Preservation Corps. He then suggested
that a compromise solution be found on the basis of the continuation
of the local governments, including the establishment of some specially
selected group to arrange an agreement regarding a modification of
these governments and the matter of the Peace Preservation Corps.

General Marshall pointed out to the Generalissimo that statements
issued by his military leaders indicated that the Government was
washing its hands of any democratic procedure and was pursuing a
dictatorial policy of military force. He further informed the Gen-
eralissimo that comparison of the army dictatorship in J apan, which
led to the destruction of that nation, with the present procedure of the
Chinese military leaders would be inevitable. General Marshall in-
formed the Generalissimo that in his opinion an extension of the exist-
ing form of partial truce would probably result in violent military
ruptures due to the tense and explosive situation, the bitterness of the
commanders in the field, and the strong desire of Government military
leaders to settle matters by force, for which the National Government
plans were complete and fairly well known to the Communist Party.

The Generalissimo finally announced that he had already issued
instructions continuing in effect his orders against aggressive action
by his troops. On J une 30, the Kuomintang Minister of Information
publicly announced that, while the truce period had expired at noon
on J une 30 and although no satisfactory agreement had been reached
between the two parties, the Government had requested General
Marshall to continue mediation with a view to reaching a peaceful
settlement and that the Government would not initiate any attacks
against Communist forces but would order its troops to remain on
the defensive and await the settlement of pending issues.

On July 1 an announcement was made that the Generalissimo
had issued orders continuing the prohibition against aggressive action
by his armies. 19 General Chou En-lai subsequently furnished Gen-

19 See annex 82.

170

TJ. S. RELATIONS WITH CHINA

eral Marshall a copy of a similar order issued on July 1 by the Chinese
Communist Party leaders. 20

DISINTEGRATION OF THE TRUCE ARRANGEMENT

The situation was further complicated by the renewed public ex-
pression by several National Government leaders of a desire to settle
the issue by force and by mass meetings in Shanghai carefully organ-
ized to stir up anti-American feeling, related in particular to the
then current Congressional consideration of lend-lease matters.

The Chinese Communists professed to regard measures for aid to
China and official statements in Washington as proving their con-
tention that American economic and military support to the Chinese
Government would continue to be given irrespective of whether the
National Government offered the Communists a fair and reasonable
basis for settlement of military and political differences. The Com-
munists maintained that new legislation intended to aid China which
was then under consideration in the United States Congress 21 was
reinforcing the National Government’s tendency to deal with the
Communists by force and was thus contributing to all-out civil war.
At the same time some reactionary Kuomintang elements in inner
Government circles were utilizing American measures as a basis for
pressing the Generalissimo to push forward with a campaign of
extermination against the Communists. Yet these and other Kuomin-
tang extremists appeared to be joining in anti-American agitation
on the grounds that American economic pressure was causing Ameri-
can imports to displace Chinese products, bankrupt Chinese indus-
trialists and prevent Chinese recovery. These Kuomintang groups
were also antagonistic to the restraint exercised by General Marshall
and his assistants on the National Government with regard to an
anti-Communist military campaign and were even using the Com-
munist line against American intervention in pursuance of their aim
to free the National Government from any American impediment to
drastic anti-Communist action. The agitation and propaganda re-
sulting from the activity of the different factions was being mani-
fested in mass demonstrations, press campaigns and mob actions.
One such incident involved a Shanghai peace delegation, consisting
of educators, businessmen, students, and labor representatives and
including therein representatives of women’s organizations, which

20 See annex 83.

21 Under his wartime powers, the President had directed the establishment of
a small military advisory group in China. The proposed legislation would have
provided legislative authority for such a group and the military assistance
under the new legislation would have been carried out in accordance with the
military reorganization agreement of Feb. 25, 1946. See chapter VII.

THE MISSION OF GENERAL GEORGE C. MARSHALL 171

proceeded to Nanking on June 24 for the publicly stated purpose of
petitioning the Government to avoid civil war. This peace delega-
tion was met at the railway station and restrained from leaving by
an organized group of Kuomintang secret police, who confined the
delegates in a room and in the course of a disturbance lasting several
hours mauled and beat the delegates so severely that they were
hospitalized. Government gendarmes who were present at the be-
ginning of the incident failed to intervene and soon disappeared
and the delegates were not rescued until several hours later.

During July there began a gradual worsening of the military situa-
tion with the spread of hostilities to various points in China proper. 22
The Commissioners of the Executive Headquarters had endeavored
to keep the situation under control by dispatching a message on July
5 to all field teams and to the advance section at Changchun, in which
it was stated that the National Government and the Chinese Commu-
nist Party had announced that the truce was to be continued through-
out China pending the outcome of further negotiations. The Com-
missioners directed all commanders to refrain from aggressive action,
including advances, attacks, and pursuits. The effect of this order
was short-lived, however, and other events occurred which gave indi-
cation of further deterioration in the situation, both militarily and
politically.

On July 7 the Chinese Communist Party issued a manifesto con-
taining a bitter attack on American policy toward China and a protest
against what the Communists termed American military and financial
aid to the National Government, which encouraged the civil- war
policy of the Kuomintang. General Marshall had previously re-
frained from comment on such propaganda attacks, but the coincidence
of events led him to inform General Chou En-lai of the serious blow to
the negotiations such propaganda attacks represented, paralleling as
they did similar propaganda releases from Moscow, and of the im-
possibility of his serving any useful purpose in mediation and in the
termination of hostilities while such attacks continued.

Matters were not helped at this stage by the departure of the Gen-
eralissimo from Nanking for Kuling on July 14, which meant that
negotiations would be greatly handicapped during his absence. There
were increasing signs of the gravity of the situation from a military
standpoint, as hostilities spread in various areas. Each side accused
the other of responsibility for offensive action and movements of
troops. Accompanying the deterioration in the military situation

23 Meetings were held in early July of a special group of National Government
and Chinese Communist representatives to discuss the problem of local govern-
ment but no agreement could be reached.

172

U. S. RELATIONS WITH CHINA

were evidences of efforts on the part of certain Kuomintang officials
to suppress open criticism of the Government. Two well-known
Chinese members of the Democratic League, one of them a prominent
university professor, were assassinated by unknown persons (later
revealed to be members of the Kunming Garrison Headquarters’ secret
police) and there were indications that Kuomintang secret police were
intimidating leading Democratic League members and Chinese lib-
erals in other parts of the country.

Communist activities during this period, in line with the Yenan
propaganda attack on the United States policy toward China, began
to be centered on the United States Marines in China and in mid- July
the first serious incident involving the Communists and United States
Marines occurred — the kidnapping of 7 Marines in east Hopei and
their detention by the Communists for several days before being
released. This was followed at the end of the month by a deliberate
Communist ambush of a United States Marine-escorted motor convoy
bound from Tientsin to Peiping, during which 3 Americans were killed
and 12 wounded. 22a

22a Following the Communist ambush on July 29 of the United States Marine
convoy near Peiping, a fact-finding team of selected personnel from the Execu-
tive Headquarters was formed at the personal request of the Generalissimo and
of General Chou En-lai to determine the responsibility and to submit a report on
the incident. General Marshall delayed the formation of this team until the
United States Marine Corps investigation of the incident had been completed and
the Communists had made a personal request for such a team because of the
anticipated charge by the Communists that the National Government representa-
tive on the investigating team would automatically side with the American
member. General Marshall explained this reason to General Chou En-lai.

The investigation by the fact-finding team from Executive Headquarters en-
countered great, although anticipated, difficulties. The Communists employed
delaying tactics and vicious propaganda. General Marshall finally told General
Chou En-lai that he would not tolerate further delays and misrepresentations.
He characterized Communist tactics regarding the investigation of this incident
in emphatic terms and informed General Chou that if there were further delays
he would withdraw the American representative from the investigating team and
make a public statement of the facts. General Marshall was reluctant to take
such action, however, since it would play directly into the hands of the small group
in the Kuomintang which was blocking his efforts to terminate the fighting, would
virtually end the usefulness of the Executive Headquarters, and might result in
a general military conflagration. When General Chou stated that the reports
received from Communist representatives were completely at variance with those
from the Americans, General Marshall emphasized to him that it was quite im-
possible for the United States Army, Navy or Marine Corps personnel to involve
themselves in deliberate misrepresentation in such an investigation. He further
said that the American investigators had made no attempt, and did not intend,
to conceal facts or bend them to their advantage and that he wished to emphasize
the importance of straightforward action without delay. The testimony of the

THE MISSION OF GENERAL GEORGE C. MARSHALL 173

IV. THE APPOINTMENT OF J. LEIGHTON STUART
AS AMBASSADOR TO CHINA

The deterioration of the situation in China and what appeared to be
the decisive influence of the reactionary political and military group
around the Generalissimo convinced General Marshall of the desir-
ability of obtaining the assistance in the mediation effort of an Amer-
ican of unquestioned character and integrity and with long experience
in China. With this view in mind, General Marshall recommended
the appointment of Dr. J. Leighton Stuart, President of Yenching
University at Peiping, as American Ambassador to China. President
Truman acted upon this recommendation and on July 11, 1946, the
United States Senate confirmed the nomination of Dr. Stuart as
Ambassador to China.

On July 26, shortly after Dr. Stuart’s arrival at Nanking, General
Chou En-lai proposed that an order for the unconditional cessation
of hostilities be issued immediately and that at the same time the
various arrangements worked out during the negotiations in June be
put into effect. He further proposed that National Government and
Communist Party representatives then meet with Dr. Stuart for pre-
liminary discussion of the reorganization of the Government and local
government problems and that any agreement reached be submitted
to the PCC Steering Committee for approval since the reorganization
of the Government required the approval of all parties.

In frank discussions at this time with a high-ranking National
Government official, General Marshall endeavored to impress upon
him the gravity of the situation. He informed him that the principal
loss, in his opinion, was the lowering of the Generalissimo’s prestige
and that this was particularly tragic since the Generalissimo repre-
sented perhaps the greatest asset China had at this time. He con-
tinued that the Generalissimo’s advisers were giving him such nar-
row and prejudiced advice that the situation seemed hopeless and
that comments had been made to him privately by the Generalissimo’s
own associates which they could not make openly. He described the
weakness of the financial and economic structure of the country, which
argued strongly against civil war, and said that, if the Generalissimo
continued in his present attitude toward negotiations, civil war was

two Chinese sides regarding the incident was conflicting and General Marshall
finally instructed the United States personnel of the investigating team to with-
draw and submit their own report. This report was to the effect that a Com-
munist force had ambushed the motor convoy of Executive Headquarters and
Unbra supplies escorted by a United States Marine unit, that it had killed three
Marines and wounded 12 others and that no National Government troops were
present or involved in the incident.

174

U. S. RELATIONS WITH CHINA

inevitable. General Marshall pointed out that while the Generalis-
simo believed that the military situation would develop favorably
during this lull in negotiations, developments might not occur in ac-
cordance with his belief. He said that the Generalissimo’s military
commanders were leading him into an uncontrollable situation and
that when such a situation materialized these same commanders would
be appealing for aid which would not be forthcoming. General Mar-
shall emphasized that the United States would not underwrite a
Chinese civil war.

In later conversations with this same official, General Marshall
emphasized that the tactics being followed by the Government were
such that in its efforts to prevent communism the Government was
creating conditions favorable for a Communist regime. He cited as
an example the existing financial and economic situation which would
be made more serious by continuation of military operations and
added that civil war, accompanied by economic chaos, would provide
fruitful breeding grounds for communism.

Meanwhile, economic developments were providing grave portents
of the rapid deterioration that was to come. The resumption of
military operations was progressively isolating agricultural and
mining areas from urban centers of consumption and export, and re-
quired a steady expansion of the currency in circulation to meet the
Government’s swollen budgetary requirements. These factors com-
bined to stimulate a rapid, although not yet explosive, inflation, the
consequences of which were universal commodity speculation and
hoarding, a low level of exports and emigrant remittances and, in turn,
the steady depletion of the Government’s foreign exchange reserves.

V. ORGANIZATION OF THE STATE COUNCIL

PROPOSAL FOR A FIVE-MAN COMMITTEE

On August 1 Dr. Stuart in a long conference with the Generalissimo
at Killing proposed the organization of a special committee, including
National Government and Communist Party representatives, with Dr.
Stuart as Chairman, for the purpose of reaching an agreement for
the immediate organization of the State Council. 23 In view of the
apparent impossibility of obtaining the Generalissimo’s agreement
to the issuance of an order for the termination of hostilities, General
Marshall and Dr. Stuart considered it advisable to approach the
problem from another angle. It was their belief that if some prog-
ress were made by this committee the Generalissimo would be

For the PCC resolution on the State Council, see annex 64.

THE MISSION OF GENERAL GEORGE C. MARSHALL 175

willing to agree to a cessation of hostilities, which were at this time
increasing in extent throughout North China and were threatening to
spread into Manchuria. The Generalissimo utilized the Communist
attack on the United States Marine convoy as a reason for delaying
decision but agreed to consider the matter. General Marshall and
Dr. Stuart were of the opinion that there was urgent necessity for
creating the State Council, which, in effect, would give a form of genu-
ine legislative action for control or guidance of the Government.

On August 5 the Generalissimo gave his agreement to the formation
of a small informal five-man committee to be composed of Government
and Communist Party representatives, under Dr. Stuart as Chairman,
for the purpose of reaching an agreement for organization of the State
Council. On the following day he stipulated five preliminary con-
ditions which the Communists would have to accept and carry out
within a month to six weeks: (1) The Communist forces in north
Kiangsu should withdraw north of the Lunghai Railway; (2) Com-
munist forces should withdraw from the Tsinan-Tsingtao Railway;
(3) Communist forces should withdraw from Chengte and areas
in Jehol Province south of that city; (4) Communist forces should
withdraw into 2 y 2 provinces in Manchuria (Hsin Heilungchiang, Nen-
chiang, and Hsingan) ; and (5) Communist forces should withdraw
from places in Shansi and Shantung Provinces occupied after June
7. These terms were more exacting than those at the end of June
when the stalemate had been reached.

The Chinese Communist Party replied that the National Govern-
ment made no mention of local government and that the Communist
Party’s refusal to accept Government demands for taking over local
administration in areas to be evacuated by Communist troops, which
had led to the impasse at the end of June, was based on the grounds that
such a procedure was contrary to the PCC resolutions. 24 The Commu-
nist Party was willing to agree to the holding of political and military
discussions simultaneously but would not accept the five Government
conditions as a condition which must be agreed to prior to discussion
of political matters.

THE MARSHALL-STUART STATEMENT OF AUGUST 10, 1946

At this point in the negotiations, on August 10, 1946, General Mar-
shall and Ambassador Stuart issued a joint public statement in an

24 Annex 1 of the PCC resolution entitled “Program for Peaceful National Re-
construction” : “In those recovered areas where the local government is under
dispute the status quo shall be maintained until a settlement is made according
to Articles 6, 7 and 8 of Chapter III on Political Problems in this Program by
the National Government after its reorganization.”

176

U. S. RELATIONS WITH CHINA

effort to bring both sides and the Chinese public to a realization of
the issues and to arouse public pressure for the termination of
hostilities. Pointing out that the fighting threatened to pass out of
control and that the economic situation was most serious, they stated
that both the Government and the Communist leaders wished to put
an end to the fighting but that there was still lack of agreement on
certain issues. The redisposition of troops was one of the issues
mentioned, but General Marshall and the Ambassador informed the
Chinese public that a more fundamental issue concerned the charac-
ter of local governments following such a redisposition . 25

In very frank conversations with the Generalissimo at this time
General Marshall outlined his estimate of the situation as follows:
Events during the weeks following his final talk with the General-
issimo prior to the latter’s departure for Kuling in July corresponded
almost exactly with his predictions at that time. The Generalissimo
had said that he could control the situation in Manchuria and that
fighting in North China would be local and that, if General Marshall
were patient, the Communists would appeal for a settlement and
would be willing to make compromises necessary for such a settle-
ment. Fighting in North China would, however, under present circum-
stances soon be completely out of control. Once it spread to Jehol
Province, Manchuria would be affected, and the result would be a civil
war beyond his or Communist control. This would be a catastrophe in
that it would afford an ideal opportunity for the Communists to ex-
pand and for the U.S.S.R. to support the Chinese Communists, either
openly or secretly. The Government had much to lose and little to gain
from hostilities at this time, which might end in the collapse of the
Government and of the country’s economy. The Generalissimo must
remember that the long lines of communication and the terrain fa-
vored the employment of Communist guerrilla tactics. General Mar-
shall’s objective, beyond that of a unified and rejuvenated China, was
not what some of the Generalissimo’s advisers seemed to think — that
is, to put the Communist Party in control. He opposed the policy
of the Generalissimo and his immediate advisers because he thought
that the procedure of the National Government would probably lead
to Communist control in China ; the chaotic conditions then developing
would not only weaken the Kuomintang but would also afford the
Communists an excellent opportunity to undermine the Government.
Information reaching General Marshall from a wide variety of sources
indicated a serious lowering of Kuomintang prestige, and criticism of
Kuomintang governmental procedure was increasing daily. The most

25 See annex 84.

THE MISSION OF GENERAL GEORGE C. MARSHALL 177

serious consequence of the situation was its profound injury to the
prestige of the Generalissimo, which was perhaps China’s greatest
asset.

GENERALISSIMO CHIANG KAI-SHEK’S POSITION

After frequent conferences the Generalissimo indicated his willing-
ness to make an effort to reach agreement with the Chinese Commu-
nists for the organization of the State Council through the Five-Man
Committee, but he was not willing to agree to a termination of the
fighting until his five conditions had been met. The Generalissimo
informed General Marshall that even this concession was a great one
and involved a military risk on the part of the Government. General
Marshall did not agree with this view and considered that the greater
risk was involved in the continuation of the fighting.

On August 13 the Generalissimo issued a public statement which was
indicative of his attitude. 26 The entire blame for the breakdown in
the negotiations and the economic distress in the country was laid at
the door of the Chinese Communists. He described the Government’s
policy as follows: (1) the ending of the period of political tutelage
and establishment of constitutional government; (2) adherence to the
PCC resolutions; (3) broadening of the basis of the Government by
the inclusion of members of all parties and non-party persons to carry
out the PCC Program of Peaceful National Reconstruction; (4) ad-
herence to the cessation of hostilities agreement of January 10, with
the proviso that the Communists withdraw from areas “where they
threaten peace and obstruct communications”; (5) the use of political
means to settle political differences, but only if the Communists gave
assurance and evidence that they would carry out the various agree-
ments reached; and (6) the protection and security of the people and
their properties and the removal of any threat to peace.

MAJOR FACTORS OF DISAGREEMENT

On August 22 General Chou En-lai expressed his willingness to par-
ticipate in the meetings of the Five-Man Committee to discuss the
organization of the State Council. There were two issues connected
with this question: (1) the allocation of seats on the Council among
the political parties and the non-party group and (2) the veto power
in the Council in connection with the carrying out by the reorganized
Government of the Program for Peaceful National Reconstruction
agreed upon by the PCC and constituting one of the PCC resolutions.

28 See annex 85.

178

U. S. RELATIONS WITH CHINA

The military situation was growing more serious day by day and
there was at this time an immediate threat of an outbreak of fighting
in Jehol Province, northeast of Peiping. The Chinese Communist
Party had issued a general mobilization order, which the Communists
contended was a defensive measure against what they considered to be
the purpose of the National Government to settle issues by military
force. The fact of the matter was that each side took the stand with
General Marshall that the other was provoking the fighting and could
not be trusted to go through with an agreement. The effort of Gen-
eral Marshall and Ambassador Stuart with respect to the State Coun-
cil was another move, on a higher level, to break the stalemate and
make it possible to terminate hostilities.

In late August the Generalissimo gave his formal agreement to the
creation of the Five-Man Committee to pave the way for the formation
of the State Council and also agreed that the conclusions of this group
would be presented to the PCC Steering Committee for approval in
accordance with the PCC resolutions. Shortly thereafter he ap-
pointed the National Government’s two members of the Committee.
At the same time he indicated that he had not in any way moderated
his insistence on the five conditions to be met by the Communists in
order to bring about a cessation of hostilities. In view of these five
conditions General Chou En-lai expressed doubt regarding the pro-
posal for creating the State Council, contending that it would only
serve to give false encouragement to the public since the Generalis-
simo had no intention of facilitating the cessation of hostilities by
moderating his previous terms.

Under these circumstances, General Marshall and Ambassador
Stuart were concentrating on the measures to create the State Council
as at least one definite step toward governmental reorganization that
might exert an influence sufficient to furnish a basis for the termina-
tion of the fighting. The Generalissimo informed General Marshall
that all that was necessary was for the Chinese Communists to stop
fighting and abide by the terms of the cease-fire order of J anuary 10,
although under questioning he admitted that he was not moderating
his five conditions.

In the meantime the National Government continued its offensive
in north Kiangsu, cleared the Communists from the Tsinan-Tsingtao
Railway and captured Chengte, capital of Jehol Province, on August
29. These were all points covered by the five Government conditions.
The Communist forces launched an attack along the Lunghai Railway
between Hsuchow and Chengchou and began their siege of Tatung in
early August.

THE MISSION OF GENERAL GEORGE C. MARSHALL 179

VI. THE TRUMAN-CHIANG MESSAGES OF
AUGUST 1946

PRESIDENT TRUMAN’S MESSAGE OF AUGUST 10

In the meantime, on August 10, 1946, President Truman had for-
warded to the Generalissimo a personal message, in which the Presi-
dent had expressed his concern at the deteriorating situation in China
and at the actions of selfish interests of extremist elements, equally
in the Kuomintang and the Chinese Communist Party. The Presi-
dent described the growing conviction that an attempt was being made
to settle major social issues by resort to force rather than by demo-
cratic procedures. He pointed out that it was still the firm desire
of the American Government and people to assist China to achieve
lasting peace and a stable economy under a truly democratic govern-
ment, but that unless convincing proof were shortly forthcoming that
genuine progress was being made toward a peaceful settlement of
internal Chinese problems, it would be necessary for the President to
redefine and explain the position of the United States to the Ameri-
can people. 27

GENERALISSIMO CHIANG’S REPLY OF AUGUST 28

To this the Generalissimo replied on August 28. 28 The reply placed
the blame for the fighting on the Communists and charged that the
aim of Communist policy was to use armed force to seize political
power, overthrow the Government, and install a totalitarian regime.
He stated that while mistakes had been made by some National Gov-
ernment subordinates they had been minor in scale compared with the
flagrant violations of the Communists and that the National Govern-
ment had dealt sternly with its offenders. The Generalissimo pro-
claimed his policy of broadening the basis of the National Government
by the inclusion of all parties and non-party personnel and said that
success must depend upon the sincerity of the Communists in re-
sponding to the National Government’s appeals.

PRESIDENT TRUMAN’S MESSAGE OF AUGUST 31

In view of the generally unsatisfactory nature of Generalissimo
Chiang Kai-shek’s reply of August 28 to President Truman’s per-
sonal message and the continued deadlock in the negotiations, the
President forwarded a further message to the Generalissimo in which
he emphasized that the prompt end of the threat of civil war in China

27 See annex 86.

” See annex 87.

180

U. S. RELATIONS WITH CHINA

through the establishment of political unity would make it feasible
for the United States to proceed with its plans further to aid China
in the rehabilitation of its industrial and agricultural economy. 29

VII. THE DRIFT TOWARD ALL-OUT STRIFE

COMMUNIST RESENTMENT OF AMERICAN AID TO CHINA

The signing of an agreement between the Chinese and United States
Governments on August 30, 1946, for the sale of United States Govern-
ment surplus property in various islands of the Pacific was the occasion
for the issuance of a statement by the Chinese Communist Party at
Shanghai attacking the United States for extending large-scale mili-
tary aid to the National Government. General Marshall had ex-
plained to General Chou En-lai the background of the negotiations
leading to the signing of this agreement prior to its actual completion
and had explained that the surplus property in question did not
contain combat materiel but consisted of machinery, motor vehicles,
communications equipment, rations, medical supplies and various
other items which would be of considerable value in the rehabilitation
of the Chinese economy. The transaction could not be held in abey-
ance until the two Chinese groups settled internal differences which
had existed over a long period of years. The alternative was to de-
prive China and its people of the opportunity to acquire materials
beneficial to its reconstruction.

In view of continued Chinese Communist propaganda attacks on the
surplus property agreement of August 30, 1946, General Marshall
gave a very detailed explanation of this transaction to the Communist
Party representative. He pointed out that this transaction had been
under discussion since the beginning of 1946 and had almost been
settled at the time of General Marshall’s departure for the United
States in March. During his visit to the United States he had ironed
out most of the difficulties involved and the failure to reach an agree-
ment on this transaction in February had resulted from Chinese
Government efforts to improve the terms. The alternative to com-
pleting an agreement with China for the sale of this surplus property
was the immediate disposal of the property to other governments in
the Far East or dumping it in the ocean, courses of action which
would have deprived China of material of considerable importance
in the economic rehabilitation of the country. General Marshall con-
tinued that Chinese Communist propaganda had imputed to this
transaction every evil purpose possible and that great harm had thus

29

See annex 88.

THE MISSION OF GENERAL GEORGE C. MARSHALL 181

been done. He concluded that while he accepted this propaganda as
inevitable, he was greatly disturbed when a proposal such as that for
the informal Five-Man Committee was being destroyed as a result of
such propaganda. The Chinese Communist Party representatives,
however, continued to be critical of the surplus property agreement on
the grounds that items such as trucks, communications equipment and
army rations and uniforms would be used for civil war purposes and
other items would be sold on the market and the proceeds thereof
expended for military purposes.

With respect to United States military aid programs 30 General
Marshall was being placed in the untenable position of mediating
on the one hand between the two Chinese groups while on the
other the United States Government was continuing to supply arms
and ammunition to one of the two groups, namely, the National
Government. Action was therefore taken in August to suspend
certain portions of these programs which might have a bearing on
the continued prosecution of hostilities in China. Licenses were not
granted for the export to China of combat type items of military
equipment and in late September shipments of combat items from the
Pacific area to China were temporarily suspended. (On October 22,
1946, the suspension was lifted to permit the delivery of civilian type
items for the Chinese Air Force.) This ban was imposed at a time
when the National Government was gradually increasing the tempo
of its military campaign and when its reserves of materiel were ample.
The ban apparently had little effect, since it was not until November,
when the National Government had reached the peak of its military
holdings, that the National Government issued an order for the cessa-
tion of hostilities. By that time the Government’s forces had occupied
most of the areas covered by its demands to the Chinese Communists
in June and during later negotiations and had reached what turned
out to be the highest point of its military position after Y-J Day.

PROBLEMS RELATING TO THE FIVE-MAN COMMITTEE

By September 3 both Chinese groups had named their representa-
tives to the informal Five-Man Committee. Agreement on the com-
position of the Committee did not, however, mean that Committee
meetings were assured. The Chinese Communist Party continued to
insist on the receipt of assurances from the Government that the
latter would issue orders for the cessation of hostilities when agree-
ment should be reached in the Committee.

See chapter VII.

182

U. S. RELATIONS WITH CHINA

In referring to the informal Five-Man Committee General Mar-
shall pointed out to the Chinese Communist Party representative that,
when this proposal was presented to the Generalissimo, the latter
had said that it would not be an effective procedure since the Commu-
nists would immediately introduce other matters which would so com-
plicate the discussions that no progress would be made. General
Marshall had informed the Generalissimo that Dr. Stuart would act
as chairman of the Committee only during discussion of State Council
issues and that if other issues were brought up Dr. Stuart would
withdraw from the discussions. General Marshall further explained
to the Communist Party representative that he had exerted every
effort and every argument to end the impasse and obtain a cessation
of hostilities and that he had ignored the attacks on him personally,
both those made publicly by the Communists and those made by
individuals within the Government who were opposed to almost
everything he had been trying to accomplish.

The Chinese Communist Party attitude toward the proposal for the
informal Five-Man Committee was that it would agree to participate
in the discussions of the Committee upon the receipt of a guarantee
that cease-fire arrangements would be made and that the Government
would drop its five conditions after the Committee reached a formula
for Government reorganization. The Communist representative
also stated that the Communist Party would not name its mem-
bers to the State Council while fighting continued because the Gov-
ernment apparently wished to have the State Council decide upon
cease-fire arrangements. He pointed out that if the matter were left
to the State Council, the Kuomintang, together with the Youth Party,
would have a majority of the votes and any cease-fire arrangements
would thus be on Kuomintang terms. The Communists desired that
the Committee of Three handle such arrangements. In brief, the
Communist Party position was that it would participate in the discus-
sions in the Five-Man Committee provided that, when a basis of agree-
ment should be reached, a cease-fire order would be issued. It desired
that an unconditional cease-fire order be issued or that the Committee
of Three meet immediately to discuss this question.

Following several days of conferences at Killing between the Gen-
eralissimo and General Marshall, the former indicated that certain
terms were acceptable to him. He agreed that the settlement of the
military terms for the cessation of hostilities would be made by the
Committee of Three and not by the State Council provided the Com-
munist Party agreed to have the Committee of Three take action on
the various issues discussed by that Committee in June. These were
the questions of restoration of communications, the terms for the

THE MISSION OF GENERAL GEORGE C. MARSHALL 183

termination of hostilities and the redistribution of troops in Man-
churia and the military reorganization of the armed forces which
would stipulate the places where Communist troops were to be sta-
tioned. The Generalissimo had yielded on one important point by
agreeing that the question of local government could be referred to the
State Council after its establishment. He also expressed his willing-
ness to have the Constitutional Reviewing Committee resume its work
when the Five-Man Committee had reached agreement and its con-
clusions had been approved by the PCC Steering Committee but said
that, prior to the issuance of a cease-fire order, the Communist Party
must name its representatives to the National Assembly. General
Marshall had gained the impression from statements by the Gen-
eralissimo that he considered that practically all the points covered by
his five conditions would be automatically taken care of by his insist-
ence on continued Government military occupation of places recently
occupied by its troops. It was also the impression of General Marshall
that reorganization of the Executive Yuan would take place after the
convening of the National Assembly.

When these terms were transmitted to General Chou En-lai, he
expressed the view that, except for the proposal for the Five-Man
Committee to discuss the reorganization of the State Council, the
entire procedure in connection with political considerations outlined
by the Generalissimo was contrary to the PCC resolutions. The Com-
munist Party asked, therefore, that the Committee of Three be con-
vened immediately to find some basis for the issuance of a cease-fire
order.

General Marshall considered that the Communist Party proposal
meant a return to the impasse at the end of June which Dr. Stuart
and he had been endeavoring to break through by the proposal for the
reorganization of the State Council. He pointed out that unless the
Committee of Three meeting were paralleled or preceded by efforts to
reorganize the State Council, the situation had merely returned to
the previous deadlock. It was General Marshall’s position that the
stand taken by the Chinese Communist Party was harmful to it, as
the Government probably wanted all the time possible for military
operations and time was thus to its advantage.

During this period the Communist representatives continued to
insist on two points: (1) assurances from the Government that the
Communists would be able to control sufficient votes in the State
Council to veto any revision of the PCC resolutions, and (2) the early
issuance of a cease-fire order.

The Generalissimo indicated at this time that he would not agree to
a meeting of the Committee of Three until the Five-Man Committee

184

U. S. RELATIONS WITH CHINA

should meet and give indication of reaching an agreement for the
organization of the State Council and all that it was necessary for
the Communists to do in connection with the National Assembly was
to submit a list of their delegates. The Generalissimo also indicated
that he would not agree to informal discussions of the State Council
issues by Government members of the Five-Man Committee prior to
the formal meetings of the Committee, but that he would agree spe-
cifically that the two questions of the allocation of seats in the Council
and the veto power would be the subjects for that Committee to discuss
and settle.

On September 16 General Chou En-lai departed from Nanking for
Shanghai. Prior to his departure he forwarded to General Marshall
three memoranda. The first memorandum outlined United States aid
to the Chinese Government, described it as contributory to civil war,
protested the sale of United States Government surplus property to
the Chinese Government, and demanded that the United States Gov-
ernment freeze all supplies and shipping covered by the surplus prop-
erty agreement pending a settlement in China and the restoration of
peace and unity and establishment of a coalition government. The
second memorandum requested the convening of the Committee of
Three to discuss the issuance of an order for the cessation of hostili-
ties. 31 The third memorandum announced the departure of General
Chou for Shanghai and said that he would return as soon as a meeting
of the Committee of Three should be convened. 32

The Generalissimo, when informed of the situation, said that he
would not agree to Government participation in the Committee of
Three until the Five-Man Committee had been convened and had
given some indication of reaching an agreement. He did agree, how-
ever, to a compromise proposal presented by General Marshall regard-
ing the allocation of seats in the State Council, which would have given
the Communists within one vote of a veto power to block revision of the
PCC resolutions, on the assumption that there was certain to be at
least one liberal-minded, independent councillor who would vote
independently.

NEITHER SIDE YIELDS MEASURABLY

During this period of negotiations, there had been little change in
the position of the Chinese Communists. They continued to insist
that a solution for the cessation of hostilities issue was a prerequisite
to their participation in the Five-Man Committee discussions looking
toward the organization of the State Council, although they did finally

81 See annex 89.

“ See annex 90.

THE MISSION OF GENERAL GEORGE C. MARSHALL 185

agree to enter into Committee discussions provided the Committee of
Three should meet simultaneously to discuss the cessation of hostili-
ties ; they demanded that the Generalissimo’s five conditions be dropped
after a basis for the State Council should have been reached in
the Five-Man Committee ; they stated their refusal to name their mem-
bers of the State Council, in the event of agreement on a formula for
the Council, until hostilities should cease; and they indicated their
desire that the PCC Steering Committee should discuss the reorgan-
ization of the Executive Yuan. The greatest concern of the Com-
munists during this period was for the cessation of hostilities and for
assurances that the PCC resolutions would not be modified ; to this
latter end they insisted on some formula in the veto power arrange-
ment which would ensure that the PCC resolutions would not be
changed, as they apparently felt that their safety lay in the retention
of the decisions of the PCC.

The Government position during this period was less fixed: The
Government first placed the blame on the Communists for the initia-
tion of the fighting and thus insisted that there was no need to issue
a cease-fire order ; the Government stated at the beginning of Septem-
ber that it would not abandon the Generalissimo’s five conditions;
and Government spokesmen indicated that all issues regarding a truce
and the settlements in various areas were to be discussed in the State
Council. Subsequently, however, after an earlier refusal to consider
the convening of the Committee of Three, the Generalissimo agreed
to permit that Committee to settle the cessation of hostilities issue
provided the Communists would carry out certain tentative agree-
ments reached during June and, in effect, abandoned the five con-
ditions through agreement to permit the Kiangsu local government
problem to be settled by the State Council. Government military ad-
vances had in any case more or less made the carrying out of most
of these five conditions a fait accompli. The Generalissimo also agreed
to the summoning of the Constitutional Reviewing Committee as soon
as the Five-Man Committee should have reached an agreement and
this agreement should have been confirmed by the PCC Steering Com-
mittee, thus providing some assurance to the Communists of con-
formity with PCC procedures. He had, however, posed an additional
condition by stipulating that he would not agree to the cessation
of hostilities until the Communists should have named their
delegates to the National Assembly, a procedure which the Com-
munists characterized as not in conformity with the PCC resolutions ;
and he had indicated that the Executive Yuan would not be re-
organized until the National Assembly should have convened, al-
though the PCC resolutions envisaged the reorganization of the Execu-

186

U. S. RELATIONS WITH CHINA

live Yuan prior to that time. The Generalissimo also indicated that
he contemplated continued Government military occupation of the
places occupied in its military campaign. Toward the end of this
period of negotiations, the Generalissimo agreed to the convening of
the Committee of Three when the Five-Man Committee should have
given evidence of having reached agreement on the State Council,
but he would not agree to informal meetings of the Five-Man Com-
mittee prior to its formal meetings.

The positions of the two parties thus continued irreconcilable.
General Marshall and Dr. Stuart had endeavored to break the dead-
lock through the proposal for the Five-Man Committee as a step lead-
ing toward the cessation of hostilities. They had exerted strong
pressure on the Generalissimo in an effort to obtain his concurrence
to this proposal only to meet with Communist refusal to participate
in the meetings of the Committee. Propaganda campaigns, as usual,
played a part in wrecking their efforts, as they led to confusion and
misunderstandings. The most bitter of these campaigns was that di-
rected by the Communist Party against the American Government
and the surplus-property transaction. Communist distrust and Com-
munist practices of distortion and disregard of the truth imputed to
this transaction an evil purpose intended to further civil war in China,
which was utterly contrary to the facts. The Generalissimo had frank-
ly told General Marshall that the conclusion of an agreement for the
termination of hostilities was his final trump card in forcing the
Communist Party to name its delegates to the National Assembly.
Since the Communist Party considered this as a sixth condition to be
added to the previously announced five conditions, they were pressing
for the more immediate issue, as they saw it, of terminating the
fighting.

On September 19, in response to an oral request from the Com-
munist Party representative at Nanking, General Marshall communi-
cated to General Chou En-lai at Shanghai the National Government
reaction to General Chou’s request for a meeting of the Committee of
Three. 33 In a further memorandum from Shanghai, General Chou
again repeated his request for a meeting of the Committee of Three
and indicated that unless the meeting were convened he would be
compelled to make public all the important documents in the negotia-
tions since the June truce period. 34 General Marshall made it very
clear to the Communist Party representative at Nanking at this time
that in view of the vicious Communist propaganda attacks directed
against his personal integrity and honesty of purpose, which were

" See annex 91.

“ See annex 92.

THE MISSION OF GENERAL GEORGE C. MARSHALL 187

being paralleled by repeated private requests from the Communists
that he continue his mediation efforts, he wished to emphasize that such
a procedure would no longer be tolerated — if the Communists doubted
his impartiality as a mediator, they needed only to notify him accord-
ingly and he would immediately withdraw from the negotiations.

In discussions of the situation with high-ranking National Govern-
ment representatives at this time, General Marshall impressed upon
them the delicacy of the situation and the possibility that, if the
situation continued to deteriorate, the Communists would be driven
to seek and be dependent upon outside support, such as Russian aid,
which would make the task of peaceful settlement much more difficult.

Since the Generalissimo was expected to return to Nanking from
Ruling, where he had been since mid- July, General Marshall and
Dr. Stuart addressed a joint letter to General Chou En-lai at Shanghai
asking that he also return to Nanking in order that further efforts
could be made to achieve a peaceful arrangement. 35 General Chou
maintained in his reply his previous stand that he would prefer to
await the convening of the Committee of Three. 36

Upon the return of the Generalissimo to Nanking and pursuant to
his request for advice regarding the issuance of a public statement,
General Marshall suggested on September 27 that the Government
propose the convening of the Five-Man Committee and the Committee
of Three with the understanding that the agreements tentatively
reached in June be carried out, that the Committee of Three decide
the problem of the military reorganization and integration agreement,
that the PCC Steering Committee confirm whatever conclusions were
reached by the Five-Man Committee, that all local government issues
be settled by the State Council and that concurrently with the cessation
of hostilities the Communist Party publish the list of its delegates to
the National Assembly. General Marshall set forth these procedures
in a draft statement for approval by the Generalissimo and possible
use. 37 General Marshall suggested that these arrangements be
accompanied by Government action to secure the immediate cessation
of hostilities.

It was the view of General Marshall that, if the Communists
expressed agreement to the general terms and procedures outlined,
an order for the cessation of hostilities should be immediately issued
and the Five-Man Committee and the Committee of Three should
meet at once. The Generalissimo subsequently informed General
Marshall that after study of this suggestion he had come to the

“ See annex 93.

86 See annex 94.

87 See annex 95.

188

U. S. RELATIONS WITH CHINA

conclusion that the several agreements indicated should be completed
prior to the cessation of hostilities — in brief, the Committee of Three
would have to reach complete agreement on the redisposition of troops
for demobilization and integration of the armies and the Five-Man
Committee would also have to reach an agreement prior to the issuance
of a cease-fire order. It was the opinion of General Marshall that
such a procedure would completely vitiate the entire purpose of his
suggestion. The Generalissimo later informed General Marshall that
he had decided not to release any public statement at that time.

NATIONAL GOVERNMENT MILITARY ACTIVITIES

During this period the National Government began an advance
against Kalgan, an important Communist-held city northwest of
Peiping. The Chinese Communists, who had been beseiging Tatung
(north Shansi) since early August, announced the formal lifting of
the siege of that city in order to meet the Government charge that
Kalgan was being attacked because the Communists were threatening
Tatung. On September 30 the Kuomintang Central News Agency
announced that Government forces had begun operations for the
purpose of capturing Kalgan. On the same day the Communist
Party announced publicly its refusal to name its delegates to the
National Assembly unless certain PCC procedures were observed.

It was against this background that General Chou En-lai addressed
a memorandum to General Marshall on September 30 pointing to the
Government attack on Kalgan, one of the political and military centers
of the Communist Party, and stating that if the National Government
did not cease military operations against Kalgan the Communist Party
would be compelled to presume that the Government was giving public
indication of a “total national split” and its abandonment of a peaceful
settlement. 38 The Communist Party representatives stated orally that
the cessation of the Government drive against Kalgan was a
prerequisite to Communist participation in simultaneous meetings of
the Committee of Three and the Five-Man Committee.

FURTHER DETERIORATION IN THE NEGOTIATIONS

On October 1, 1946, in a conference with Chinese Communist Party
representatives at Nanking, General Marshall made it clear to them
that he was in agreement with neither the Communist Party’s course
of action nor that of the National Government. He said that the
situation had almost reached the point where he would not continue
in the position of a mediator and that he could no longer continue to
be a middleman in a prolonged series of accusations and counter-
s'

See annex 96.

THE MISSION OF GENERAL GEORGE C. MARSHALL 189

accusations, of proposals and counterproposals. General Marshall
stated that he had to give first consideration to the position of the
Government that he represented. He pointed out that while he was
struggling with the Chinese Government in an effort to have terms
proposed which would have a fair chance of acceptance by the Chinese
Communist Party, the latter had come forward with an announcement
of refusal to name its delegates to the National Assembly. While he
was struggling with the Chinese Communists in an effort to reach a
basis for agreement, the Government had publicly announced its attack
on Kalgan. This type of procedure had continued week after week and
month after month. He said that he wished to emphasize that the
procedure followed by the Communists was inevitably productive of
long delay during which military operations were continuing. He
concluded, however, that he was willing to discuss General Chou’s
memorandum of September 30 with the Government and would do
his best to prevail upon the Government to take action which would
increase the possibility of peaceful settlement.

General Marshall decided at this time that he would not carry oral
messages to the Chinese Communists but would transmit only written
communications from the Government.

He felt that the United States Government could not continue
to be a third party to the existing procedure under which the Govern-
ment had been proceeding with its “local operations” for 3 months.
He thought it apparent that the National Government’s campaign
against Kalgan could be justified only on the basis of a policy of
force. He felt that he could not put himself in the position of mediat-
ing during a continued series of military campaigns and that he must
have positive assurances from the National Government that there
was a reasonable basis for compromise which offered possibility of
success.

GENERAL MARSHALL CONSIDERS WITHDRAWING

In view of the existing situation, General Marshall addressed a
memorandum to the Generalissimo on October 1, in which, after stat-
ing that he was not in agreement with the present course of the Gov-
ernment or of the Communist Party, he concluded :

“I wish merely to state that unless a basis for agreement is found
to terminate the fighting without further delays of proposals and
counterproposals, I will recommend to the President that I be recalled
and that the United States Government terminate its efforts of
mediation.”

Earlier in the memorandum General Marshall stated that he had
carefully considered all the factors involved in the current status of

190

U. S. RELATIONS WITH CHINA

negotiations and military operations and had also taken into consider-
ation the most recent developments, such as the Communist Party’s
announcement of its refusal to submit a list of Communist delegates
to the National Assembly unless certain PCC procedures were met,
the Kuomintang Central News Agency announcement of the Govern-
ment operations against Kalgan, certain informal proposals presented
by Dr. T. V. Soong, and the memorandum of September 30 from
General Chou En-lai. 39

On the following day the Generalissimo gave Ambassador Stuart
an oral account of the reply which he expected to make to General
Marshall’s memorandum. He indicated that he was aware of Gen-
eral Marshall’s embarrassment in the existing situation and that he
always kept his problems in mind. He felt, however, that it was
absolutely essential to the national welfare that the Government gain
control of Kalgan and that the occupation of this city by the Govern-
ment would do much to prevent further military action by the Chinese
Communists. The Generalissimo’s statement served to convince Gen-
eral Marshall almost completely that the time had come for his recall
from China since the Generalissimo was certainly following a definite
policy of force under cover of the protracted negotiations. The Gen-
eralissimo had now completely reversed the position he had taken in
June when he had agreed that the Communists would be permitted
to retain possession of Kalgan, which they had occupied shortly after
V-J Day.

On October 2 the Generalissimo forwarded to General Marshall a
reply to the latter’s memorandum. 40 Referring to General Marshall’s
memorandum the Generalissimo said that

“the Government hereby, with all frankness, expresses its maximum
concessions in regard to the solution of the present problem”.

These “maximum concessions” were as follows: (1) While the Gov-
ernment had originally agreed that the Communist Party be allocated
8 seats and the Democratic League 4 seats on the State Council, it
would now offer 1 seat to a member of the independent group who
would be recommended by the Chinese Communist Party and agreed
upon by the Government. This would make a total of 13 seats held by
Councillors satisfactory to the Communist Party, which should with-
out delay submit the lists of its members on the State Council and of
its delegates to the National Assembly. (2) The location of the Com-
munist troops under the military reorganization plan should be
determined immediately and the Communist forces should enter such
locations according to agreed dates, the foregoing to be decided upon

89 See annex 97.

40 See annex 98.

THE MISSION OF GENERAL GEORGE C. MARSHALL 191

by the Committee of Three and carried out under the supervision of
the Executive Headquarters. The memorandum concluded that if
the Communists agreed to these two proposals “a cease-fire order should
be issued by both sides, when agreement has been reached thereon.”

The reply of the Generalissimo involved lengthy procedures during
which the attack on Kalgan would be carried to its conclusion and it
omitted any reference to the disposition of Government troops, which
was a requirement of the military reorganization agreement of Febru-
ary 25. General Marshall did not think that the United States
Government could afford to be a party to a course of questionable
integrity and he felt that this fact should be made unmistakably clear
to the Chinese Government.

In a long conference on October 4, the Generalissimo informed Gen-
eral Marshall that his departure from China was unthinkable and that
he could not possibly cease his efforts at mediation, since the crisis
in China was the most important in the world and his efforts were of
great historic significance. General Marshall explained that his own
actions and position and those of the United States Government as
represented by him were in question under the existing situation. He
stated that he was convinced that a campaign of force was in progress
and that negotiations could be described as a cover for this campaign —
under such circumstances he could no longer participate in the negotia-
tions. He continued that in June the Government had agreed that
Kalgan would be left in Communist hands at a time when the Govern-
ment was in a much weaker military position than at this time —
Chengte had now been captured, most of Hopei and Jehol Provinces
had been occupied, Government troops had advanced well beyond
Peiping in the direction of Kalgan and Government forces were on the
verge of occupying Chihfeng and Tolun, both important strategic
points. The present procedure, said General Marshall, clearly meant
a campaign of force and not a settlement by negotiation. General
Marshall pointed out that at the end of June he had opposed the whole
procedure in prospect for July and August, when the Generalissimo
had declined to accept the agreements openly reached and had stated
there would be only local fighting in China proper and no fighting in
Manchuria. He continued that he had not only disagreed with that
conception but had thought that it inevitably meant the development
of a full-fledged civil war beyond Government or Communist control
for a long time to come. This conference ended without any indication
on the part of the Generalissimo that he would halt the drive against
Kalgan. General Marshall informed the Generalissimo in conclu-
sion that he regretted to inform him that nothing had transpired in the
discussion to cause him to alter his point of view — in fact, he was the

192

U. S. RELATIONS WITH CHINA

more convinced that the United States Government was being placed
in a position where the integrity of its actions could be successfully
questioned and that he must, therefore, recommend to President Tru-
man his recall.

On the following day General Marshall forwarded a message to
Washington recommending his recall, the pertinent portions of which
are as follows :

“I feel that despite the present vicious Communist propaganda of
misrepresentation and bitter attacks and despite the stupid failure
of the Communists to agree to the Five-Man Committee under Dr.
Stuart, actuated in our opinion through fear of the very delays which
have resulted from this refusal, the United States Government cannot
afford before the world to have me continue as mediator and should
confidentially notify the Generalissimo accordingly. I believe that
this is the only way to halt the military campaign and to dispel the
evident belief of the Government generals that they can drag along
the United States while carrying out their campaign of force. It is
suggested for your approval that the following message be sent by
the President to the Generalissimo :

“ ‘General Marshall recommends that his mission be terminated and
that he be recalled. He has explained to you that he feels that a con-
tinuation of mediation under present circumstances of extensive and
aggresive military operations would place the United States Govern-
ment in a position where the integrity of its actions as represented by
him would be open to serious question. I deplore that his efforts
to bring peace to China have been unsuccessful, but there must be no
question regarding the integrity of his position and actions which
represent the intention and high purpose of the United States Gov-
ernment. I, therefore, with great regret have concluded that he should
be immediately recalled.’ ”

When word reached the Generalissimo through Ambassador
Stuart of General Marshall’s action, the Generalissimo expressed his
willingness to stop military advances against Kalgan for a period of
five days, possibly even longer if the American mediators insisted, on
condition that the Communist Party would immediately participate in
meetings of both the Five-Man Committee and the Committee of Three
and that Kalgan would be the first issue negotiated. The Generalis-
simo also requested that General Marshall and Dr. Stuart discuss the
matter with him on the following morning. Upon the receipt of this
message from the Generalissimo, General Marshall requested the De-
partment of State not to transmit to the President his recommendation
that he be recalled, pending the receipt of further instructions.

THE MISSION OF GENERAL GEORGE C. MARSHALL 193

THE KALGAN TRUCE PROPOSAL

In discussion with the Generalissimo of the Kalgan truce proposal,
General Marshall made clear that a short truce would not allow time
for successful negotiations, particularly with the threat of the resump-
tion of aggressive military action, and a long truce would be too diffi-
cult to control in view of the complications to be faced by the military
commanders in the field and their own aggressive attitudes. General
Marshall suggested that the proposal which he had presented to the
Generalissimo on September 27 be considered — this involved an imme-
diate cessation of hostilities once the Communist Party agreed to the
procedure specified. The Generalissimo said that he was unwilling
to agree to this proposed procedure, and insisted that the cessation of
hostilities must depend upon the successful completion of the meet-
ings of the Committee of Three and the Five-Man Committee. The
Generalissimo said he would, however, order a truce of five days on the
basis of Communist agreement to meetings of the Committee of Three
and the Five-Man Committee as outlined in his memorandum of
October 2. After some discussion, the Generalissimo agreed to extend
the truce period to 10 days and indicated that if, as the end of the
truce approached, it appeared that the Chinese Communists were in a
mood to negotiate, he would lengthen the period. He requested that
the truce be announced as a proposal from General Marshall and Am-
bassador Stuart rather than from the National Government. General
Marshall and Dr. Stuart agreed to this request even though it was not
their proposal — it merely represented the best terms they could obtain.

General Marshall prepared a memorandum 41 outlining the condi-
tions of the truce as agreed to by the Generalissimo and sent it to Dr.
Stuart, who communicated it orally to a Chinese Communist Party
representative, and on the following day sent a copy to this Communist
representative and an additional copy to General Chou En-lai at
Shanghai. The conditions of the truce were as follows : (1) The pur-
pose of the truce was “to carry out the two proposals of the Generalis-
simo” in his communication to General Marshall of October 2;
(2) during the truce period Executive Headquarters field teams would
check on its observance; and (3) public announcement of the truce
would be made by Dr. Stuart and General Marshall without any
announcement from the two parties.

At the same time General Marshall requested the Department of
State to inform President Truman of the foregoing events and of
General Marshall’s decision to withdraw the recommendation for
his recall.

41 See annex 99.

194

U. S. RELATIONS WITH CHINA

The Chinese Communist Party rejected this truce proposal on the
grounds that there should be no time limit to the truce period and that
discussions in the Committee of Three and the Five-Man Committee
should not be limited to the two proposals in the Generalissimo’s
memorandum of October 2 since discussion of these topics during a
truce would be considered as negotiation under military coercion. 42

THE MARSHALL-STUART STATEMENT OF OCTOBER 8, 1946

The Chinese Communist Party’s rejection of the truce proposal
placed General Marshall in a position entirely opposite from the one
he had previously held in opposing continued aggressive military
action. It was now the Government which had offered at least a tem-
porary cessation of hostilities and the Communists who declined.
General Marshall and Ambassador Stuart then issued a joint public
statement on October 8 in regard to the situation. 43 The statement
began with a description of General Chou En-lai’s memorandum of
September 30 on Government military operations against Kalgan and
the Communist attitude thereto. It was a recital of the negotiations
from the time of the receipt of General Chou’s memorandum asking
for a cessation of the attack on Kalgan to the time of the Communist
Party rejection of the 10-day truce proposal.

THE COMMUNIST POSITION

In discussions with General Marshall and Dr. Stuart, Communist
Party representatives stated the Communist views : The Communist
Party wanted a definite cessation of the attack on Kalgan and the
only way for the Government to show its sincerity was to withdraw
its troops to their original positions. The Communists had hoped
that General Marshall and Dr. Stuart would be able to make the
Government realize that it was assuming the role of a victor over
the vanquished and that they would also be able to make the Gov-
ernment change its policy of war, but the Communists had now lost
hope. They appreciated very much the efforts of General Marshall
and Dr. Stuart, but China, they said, was now in the midst of civil war.
The Communists hoped that General Marshall and Dr. Stuart would,
on the one hand, have the United States Government cease its aid to
the Chinese Government and, on the other hand, “have a fair mediating
process which would be acceptable to both sides.” General Marshall
replied that he did not accept this statement regarding the United
States Government and that he did not like the inference of the sec-
ond portion of this statement. He concluded that he very much
feared that his efforts in the negotiations had terminated.

* See annex 100.

41 See annex 101.

THE MISSION OF GENERAL GEORGE C. MARSHALL

195

In view of the unsatisfactory nature of this conversation and with
the desire to do everything possible at this critical period, General
Marshall proceeded to Shanghai to see General Chou En-lai. In their
conversation it developed that some misunderstanding had arisen
from the wording of the terms of the truce proposal which had led
to uncertainty whether the Communist Party was to give considera-
tion to the two proposals of the Generalissimo or to “carry out” such
proposals. General Chou indicated that the two proposals of the
Generalissimo were from the Communist viewpoint unacceptable con-
ditions. One of them, he said, meant that the Communist Party could
not exercise the veto power to prevent revision of the PCC resolutions
and the other proposal meant that, while the Communist troop loca-
tions would be fixed, the Government armies would be free to move.
General Chou concluded that it was the view of the Communist Party
that only a lasting truce would demonstrate that the Government did
not desire a “total split.” He then presented to General Marshall a
three-point military and eight-point political proposal which, he said,
represented the Communist stand on military and political issues.
The military proposal required that all troops resume the positions
held in China proper as of January 13 and in Manchuria as of June 7,
that the location of all troops until the time of army reorganization
should be fixed and that Government troops moved after January 13
should be returned to their original locations. The political proposal
consisted of detailed points for discussion by the Five-Man Committee
and the PCC Steering Committee, which all were related to the PCC
resolutions.

General Marshall emphasized to General Chou that the Generalis-
simo had not planned the truce for the purpose of gaining time for the
movement of troops and munitions, and concluded that after hearing
the views of General Chou it would seem that his mediation efforts
were futile and there was no practical basis for further action on his
part. General Marshall reminded him that some time ago he had indi-
cated that if the Communist Party did not trust his impartiality as
mediator it had merely to say so and he would withdraw. General
Chou said that he would make a written reply to the Generalissimo,
and that, although he had not welcomed the joint statement issued by
Ambassador Stuart and General Marshall, he wished to make clear
that he did not cast any reflection on General Marshall’s actions
throughout the entire period of mediation.

On October 9 General Chou En-lai replied to the Generalissimo’s
memorandum of October 2 and the Kalgan truce proposal in a memo-
randum addressed to General Marshall. 44 This memorandum con-

44 See annex 102.

196

TJ. S. RELATIONS WITH CHINA

eluded that the Government should cease its attack on Kalgan and
that if the Government should permanently call off such an attack,
the Communist Party was willing to participate in meetings of the
Committee of Three and the Five-Man Committee or the PCC Steer-
ing Committee to have simultaneous discussions of (1) the cessation
of hostilities and (2) the implementation of the PCC resolutions.
The memorandum also included the military and political proposals
made by General Chou to General Marshall at Shanghai.

GENERALISSIMO CHIANG’S STATEMENT OF OCTOBER 10, 1946

On October 10, 1946, the anniversary of the founding of the Chinese
Republic, the Generalissimo made a speech, 45 in which, referring to
the negotiations, he made statements along the following general
lines :

The Government asked the Communist Party to abandon its plot to
achieve regional domination and distintegration of the country by
military force and to participate along with all other parties in the
National Government and the National Assembly. It was the hope
of the Government that the various political parties and groups would
submit their lists of candidates to the State Council and of delegates to
the National Assembly. The Government desired a total and per-
manent cessation of hostilities, but during the past 3 months the
Communists had rejected all the proposals of the Generalissimo and
had also turned down the truce proposal presented by General Mar-
shall and Dr. Stuart; the Government was not, however, going to
abandon its policy of a peaceful settlement. It would continue to hope
and seek for a settlement by mediation and consultation.

THE FALL OF KALGAN AND THE SUMMONING OF THE NATIONAL
ASSEMBLY

During this period a group of representatives of the Democratic
League and the China Youth Party proceeded to Shanghai for the
purpose of inducing General Chou En-lai to return to Nanking. Just
as it appeared that their efforts would succeed, a series of events oc-
curred which aroused bitter feeling on the part of the Chinese Com-
munists and one of which created strong opposition from all minority
parties. On October 10, Government forces captured Kalgan with
little or no opposition from Communist troops and on the same day
occupied Chihfeng, the last Communist stronghold in Jehol Province.
Government troops at this time were also reported to be on the verge
of occupying additional Communist-held towns in north Kiangsu.
On the same day the Government announced the resumption of na-

See annex 103.

THE MISSION OF GENERAL GEORGE C. MARSHALL 197

tionwide conscription, which had been suspended following the J apan-
ese surrender in August 1945. Even after these events, General Chou
En-lai was said by Dr. Sun Fo, President of the Legislative Yuan, to
be ready to return to Nanking, but the issuance by the Government on
October 11 of a mandate announcing that the National Assembly would
be convened on November 12, as scheduled, caused General Chou to
cancel his plans. This announcement also resulted in strong criti-
cism from the other minority parties, as they considered it evidence of
unilateral and dictatorial action on the part of the Government. They
asserted that agreement had been reached on April 24 in discussion be-
tween representatives of all parties and the Generalissimo for post-
ponement of the National Assembly, then scheduled for May 5, and
that it was understood that the date for convening the Assembly
would be decided by discussion among all parties. The National
Government explained that its action was in accordance with Kuomin-
tang regulations, which required formal notification and confirmation
of the date of the National Assembly one month prior to its convoca-
tion. The result of this series of events was to cause the cancellation
of the plans for the return of General Chou and the minority party
representatives to Nanking.

DRAFT STATEMENT PREPARED FOR THE GENERALISSIMO

The Generalissimo on October 13 indicated to General Marshall and
Ambassador Stuart that he wished them to consider the possibility of
his making a statement, such as that previously suggested by General
Marshall on September 27, but modified in accordance with recent
changes in the situation. General Marshall, referring to changes in
the situation, pointed out that the important factor was the immediate
cessation of hostilities and that, even if the Communists were forced to
submit to various agreements by the pressure of Government military
action, there could be no healthy results from political negotiations and
reorganization of the Government as the bitterness engendered thereby
would be too deep and the spirit of revenge and distrust too great. The
Generalissimo replied that he could not agree to an unconditional cessa-
tion of hostilities without some evidence for the people and the Govern-
ment leaders that some advantage had been gained for the reorganiza-
tion of the Government. He mentioned the submission by the Com-
munists of their list of delegates to the National Assembly as an
example.

General Marshall reminded the Generalissimo that in early July
the latter had said that it was first necessary to deal harshly with the
Communists and later, after 2 or 3 months, to adopt a generous attitude.
It seemed to General Marshall that after more than 3 months with the

198

U. S. RELATIONS WITH CHINA

Government in possession of all the important strategic points, that
the time had come for the generous attitude of which he had spoken.
The Generalissimo agreed to this but repeated his previous statement
regarding the necessity of obtaining certain advantages prior to the
cessation of hostilities.

Pursuant to the Generalissimo’s suggestion, General Marshall and
Dr. Stuart drew up and forwarded to the Generalissimo a draft of a
statement for release by him, including therein the demand by the
Generalissimo for submission of the names of the Communist delegates
to the National Assembly. This draft statement, based upon the pre-
vious draft presented to the Generalissimo by General Marshall on
September 27, contained the following points : 46

The Five-Man Committee and the Committee of Three to hold simul-
taneous meetings immediately with the following understandings :

The various agreements tentatively reached by the Committee of
Three during the June negotiations to be put into effect and the tenta-
tive agreement reached at the same time for the redisposition of troops
in Manchuria to be confirmed.

Government troops north of the Yangtze River to continue in occu-
pation of places now under their control until the Committee of Three
reached agreement for the redistribution, reorganization and demobili-
zation of the armed forces.

The PCC Steering Committee to confirm without delay any under-
standing reached by the Five-Man Committee.

Questions of local government to be settled by the newly organized
State Council.

The Constitutional Reviewing Committee to be reconvened imme-
diately and the agreed draft to be submitted to the National Assembly
as the basis for its action.

Concurrent with the cessation of hostilities, which was to be effected
immediately following the Communist Party’s agreement to the fore-
going procedure, the Communist Party to announce its intention of
participating in the National Assembly by publishing the list of its
delegates thereto.

EIGHT-POINT PROPOSAL BY THE GENERALISSIMO, OCTOBER 16, 1946

On October 16 the Generalissimo made a public statement 47 in which
he announced the Government’s views and presented an eight-point
proposal, upon acceptance of which by the Chinese Communist Party
the National Government was prepared to arrange for the immediate
cessation of hostilities. The Generalissimo referred to his public state-

46 See annex 104 for full text.

47 See annex 105.

THE MISSION OF GENERAL GEORGE C. MARSHALL 199

ment on October 10, in which he had said “the Government has always
adhered to the political solution of our domestic political problem
and would not give up this policy of peaceful settlement under what-
ever circumstances,” and continued that, despite the recent Communist
rejection of Government proposals, the Government would not aban-
don its policy of “peaceful settlement” and would still seek a settlement
by mediation and consultation. The Generalissimo’s eight-point pro-
posal was very similar to the proposals set forth in the draft statement
prepared by General Marshall and Dr. Stuart, the chief difference
being (1) the deletion of the point regarding the separation of oppos-
ing troops in close contact upon which tentative agreement had been
reached in June and (2) the exclusion of Manchuria from the pro-
posal providing for the settlement of the question of local government
by the State Council. One point required that the tentative agreement
reached for the redisposition of troops in Manchuria be carried out in
accordance with a fixed schedule without delay while the draft state-
ment had provided only that this tentative agreement was to be con-
firmed. The proposals by the Generalissimo were also forwarded to
General Marshall for transmission to the Chinese Communist repre-
sentatives on October 17.

Despite the similarity of the Generalissimo’s eight-point proposal
to the draft statement submitted to him on September 27 by General
Marshall, the lapse of time and the military events intervening, such as
the occupation of Kalgan and the opening of a Government attack on
Antung and Chefoo at the time of the announcement of this eight-point
proposal, largely nullified most of the possibilities for good results.

THE COMMUNIST REPLY

The initial Communist reaction to the Generalissimo’s eight-point
proposal was unfavorable, as indicated by General Chou En-lai at
Shanghai to a group of minority party leaders and by a Communist
radio broadcast from Yenan. The Third Party Group (minority
party leaders) were endeavoring to persuade General Chou to return
to Nanking from Shanghai and three high-ranking National Govern-
ment officials had also gone to Shanghai to confer with General Chou.
General Marshall was of the opinion that the American mediators
should stand aside at this time and encourage Chinese efforts to reach
a settlement, with the Third Party Group in the position of the middle-
man. On October 20 General Chou En-lai and the members of the
Third Party Group decided to return to Nanking on the following
day. Apparently no new understanding had been reached, but the
spirit of the conferences in Shanghai appeared to have offered the
possibility of continued negotiations.

200

U. S. RELATIONS WITH CHINA

In early October the Generalissimo had informed General Marshall
of his plans to proceed to Formosa for a brief visit on October 20.
When, however, it was learned that General Chou En-lai and the
Third Party Group had decided to return to Nanking, the General-
issimo remained in Nanking until their arrival and had a brief talk
with them before departing for Formosa on the same day. Prior to
his departure, he informed General Marshall that he would be absent
for only a few days and that he would return at any moment if his
presence in Nanking were desirable in connection with the negotiations.

During this period fighting continued in various parts of North
China, although the situation remained relatively quiet in Manchuria
except for small-scale actions and Communist disruption of lines of
communication. Communist actions along the Peiping-Hankow
Railway line, intermingled with general fighting in the southern
Hopei area crossed by this line, were reportedly devoted largely to
the destruction of the rail lines. Government forces were apparently
centering their attention on coal mining areas and they occupied two
important coal mining centers during this period. Other high lights
of this period were the Communist-organized mass demonstrations in
Harbin and Tsitsihar in northern Manchuria directed toward the
withdrawal of American troops from China and criticism of Ameri-
can interference in internal Chinese affairs. Further indications of a
deterioration in the situation were seen in the gradual evacuation of
Communist Party personnel from Nanking, Shanghai and Chung-
king to Yenan in United States Army planes furnished at the request
of the Communist delegation in Nanking.

There still remained, however, some basis for hope in the situation
in that General Chou En-lai had finally returned to Nanking from
Shanghai and in that the Third Party Group, whose chief weapon in
the discussions both with the Government and the Communists was the
question of participation or nonparticipation in the National Assem-
bly, was actively engaged in the mediation effort. This enabled the
American mediators to remain in the background.

On October 24, General Chou En-lai informed Ambassador Stuart
that the Chinese Communists could not accept the Government eight-
point proposal.

THE SPREADING OF HOSTILITIES

In the meantime military activity showed no signs of abating. Gov-
ernment forces occupied the last of the main stations on the Tsinan-
Tsingtao Railway and Government forces were moving north along
the Peiping-Hankow Railway in southern Hopei. Most serious was
the opening of a Government drive on Antung in Manchuria, from

THE MISSION OF GENERAL GEORGE C. MARSHALL 201

which the Generalissimo was now insisting that the Communists with-
draw within 15 days after the issuance of a cease-fire order. Commu-
nist propaganda attacks on the United States continued, demanding
the immediate withdrawal of all American troops and of American
support from the National Government. Further indications of the
deterioration in the situation were seen in the reduction of Communist
personnel at the Executive Headquarters at Peiping to the point that
the Communist branch was practically inoperative. The Communists
had also withdrawn their members from all field teams in Govern-
ment-occupied areas in China proper except at four points.

ATTEMPT AT MEDIATION BY THE THIRD PARTY GROUP

In a discussion of the situation with General Marshall on October 26,
General Chou En-lai said that if the Government military advances
continued there would be no necessity for continued negotiations and
the Committee of Three should take action in this matter. Further
questioning revealed that General Chou did not consider a meeting
of the Committee of Three the issue, although he did not object in any
way to such a meeting. This conversation revealed the extent to
which his altitude was governed by the deep suspicion of any terms
presented by the National Government, even when it was pointed out
to him that certain of the National Government’s eight points repre*
sen ted terms desired by the Communists on which the National Gov-
ernment had not previously agreed. General Marshall pointed out to
him that the distrust was so great on both sides that there was all the
more need to find some method on which both could agree for the
termination of the hostilities.

He continued that the situation presented an almost impossible
prospect for agreement unless divested of every detail not vital to either
party and that it was hoped that the Third Party Group might be
able to find some basis for compromise, a course infinitely better than
a mediation procedure by Americans since it would then be a settle-
ment by the Chinese themselves.

General Chou indicated that if the Third Party Group could pro-
duce a compromise proposal with a sound basis he would discuss it
with them, but that, in view of the military situation and Government
attacks in various areas, there would be no basis for any negotiations
if this situation continued. In that event, he said, his presence in
Nanking would be useless.

General Marshall pointed out that he and Dr. Stuart had tried
every possible means of stopping the hostilities without success —
their proposal for the Five-Man Committee, to which the Government
finally agreed but to which General Chou would not agree; the

U. S. RELATIONS WITH CHINA

202

Kalgan truce proposal, which General Chou had characterized as
capitulation; and now another somewhat similar situation in which
it was hoped that hostilities could be ended through the efforts of
the Third Party Group.

The continued absence of the Generalissimo from Nanking, to-
gether with the open resumption of the Government military cam-
paign in Manchuria, was detrimental to the whole situation. The
Third Party Group was becoming discouraged since its three-point
proposal 48 for a settlement of the differences had been rejected by the
Generalissimo, who had told them that they should have adopted his
eight-point proposal of October 16. General Chou En-lai had un-
officially accepted practically all of this proposal, but the news of the
Government capture of Antung caused him to say that he must await
instructions from Yenan. The Third Party Group then recom-
mended that there be an informal discussion by National Government,
Communist, and Third Party Group representatives. The General-
issimo agreed but insisted that his eight-point proposal constitute
the agenda. General Chou En-lai agreed and the meeting was
scheduled for November 4.

On October 28 in a discussion of the situation with the Generalis-
simo, General Marshall described the deep seated distrust the Com-
munist Party had of the motives of the Generalissimo and the Ivuo-
mintang leaders, to which had been added their distrust of the
American mediators. He pointed out that the Communists had no
intention of surrendering and that, while they had lost cities, they
had not lost armies, nor was it likely that they would lose their armies
since they had no intention of making a stand or fighting to a finish
at any place. He continued that the Generalissimo might be able
to take Harbin but that the Government would then be in for endless
trouble.

The Generalissimo replied that the time had come to halt the fight-
ing but he did not wish this to be conveyed to the Third Party Group.
General Marshall then explained that this group appeared to be the
only hope in the situation and urged the Generalissimo to show them
every consideration and build up their prestige by making concessions
and encouraging them to speak frankly to him. He further pointed
out that they had become so discouraged by the failure of their efforts
that they had expressed the desire to withdraw from the negotiations
and return to Shanghai.

On October 30 the Generalissimo informed Ambassador Stuart
that he was willing to make two additional concessions :

48 See annex 106.

THE MISSION OF GENERAL

GEORGE C. MARSHALL 203

(1) The cease-fire order would apply to Manchuria as well as to
China proper. Military redispositions would follow the June settle-
ment and local administration would be dealt with uniformly in all

of China.

(2) Cities and hsien along the Changchun Railway trunk line,
except for those already under occupation by the Government, would
not be taken over before the reorganization of the Government.

The arguments of the Communist Party at this time were not con-
sistent. They had insisted that the Government military leaders were
determined to settle the issues by force, yet the Communists were ap-
parently risking the continuation and expansion of the fighting in the
hope that the Government would make concessions in order to obtain
the list of Communist delegates to the National Assembly. Further-
more, the issues of the State Council and local government were not
now at this stage as difficult to solve as they had been in June and it
seemed that the principal outstanding issue was the reorganization of
the Executive Yuan. The Communists and the Democratic League
seemed to attach great importance to this issue as a condition precedent
to the convening of the National Assembly. In view of the discourage-
ment of the Third Party Group, the problem was to make this Group
aware of the fact that the military settlement was greatly affected by
political issues and that the members of the Group should stand to-
gether and remain strong under the pressure of the Government and
the Communist Party to divide them. The Government continued to
be unwilling to agree to the cessation of hostilities until the Commu-
nists submitted a list of their delegates to the National Assembly and
the Communists were willing to submit such a list only to a reorganized
Government, which to them meant the reorganization of the Executive
Yuan. The Generalissimo had indicated that he would not reorganize
the Executive Yuan until after the meeting of the National Assembly.

Several developments at this time had a bearing on the negotiations.
General Chou En-lai had agreed to return to Nanking from Shanghai
only if the Third Party Group would stand with the Communist Party
in refusing to nominate delegates to the National Assembly until the
Government had been reorganized in strict accordance with the PCC
resolutions. This was proving very embarrassing to the Third Party
Group. The Group were urging General Marshall and Dr. Stuart to
take the lead again in the negotiations, but the American mediators
declined to do so because it was very important that, if possible, a
Chinese neutral group act in mediation, at least on political questions.

Although the National Government had agreed to participate in
an informal discussion of the various issues with the Communists and
the Third Party Group, the Government representatives did not

204

TJ. S. RELATIONS WITH CHINA

attend the meeting on November 4 and the Third Party Group
merely asked General Chou to state the Communist demands. This
he did very completely, covering every issue.

On November 5 the Generalissimo informed General Marshall and
Ambassador Stuart that the absence of the Government members from
the meeting previously agreed to had resulted from a number of indi-
cations that the Communists wished to eliminate American mediation.
General Marshall expressed regret that the failure of the National
Government to participate in the meeting was due to this reason and
stated that the Communist Party either accepted the American media-
tors or did not — they either trusted the American mediators or did not
trust them and Government action could not force a decision in this
particular manner. The Generalissimo then said that the time had
come to stop the fighting and that he was prepared for an unconditional
termination of hostilities. He expressed a desire to have General
Marshall and Ambassador Stuart advise him with respect to the
announcement of the cessation of hostilities, together with a reference
to the convening of the National Assembly, which he hoped the
minority parties would attend.

GENERALISSIMO CHIANG’S STATEMENT OF NOVEMBER 8, 1946

General Marshall and Dr. Stuart, therefore, prepared a draft state-
ment which represented the views of the Generalissimo regarding the
termination of hostilities and met the issues which were certain to be
raised by the minority parties regarding conditions under which the
National Assembly would meet and adopt a constitution. (At the
request of the Generalissimo, General Marshall had frequently, during
the negotiations, prepared for his consideration and possible use drafts
of statements or of proposals which might be introduced into the
discussions. In so doing, General Marshall had acted as a staff officer
might on behalf of the Generalissimo in drawing up documents
containing the latter’s views.) Meanwhile, they received a draft of a
statement prepared by the Generalissimo which they believed would
further complicate the situation since it was highly provocative,
lengthy, argumentative and difficult to understand. Furthermore it
would not terminate the fighting in a way that promised more than
a threat of future use of force.

On November 7 General Marshall and Dr. Stuart met with the Gen-
eralissimo at the latter’s request and presented to him a Chinese trans-
lation of their draft. 49 They expressed the opinion that his draft
statement would merely aggravate the situation in China. The Gen-

49 See annex 107.

THE MISSION OF GENERAL GEORGE C. MARSHALL 205

eralissimo then explained that in preparing the draft he had had to
take into consideration a number of important points :

(1) While there had previously been a divided opinion in the Gov-
ernment regarding the proper course to be followed, there was at this
time a complete unanimity of opinion that a policy of force was the
only course to follow.

(2) He must give careful consideration in the organization of the
National Assembly to the delegates who had been legally elected in
1936 and were now assembled in Nanking and not emphasize the
dominant importance of the PCC resolutions in contrast to the 1936
draft constitution.

(3) He must also give careful consideration to the morale of the
Army, considering the losses that had been recently sustained, if they
were to be greeted by the announcement of an unconditional cessa-
tion of hostilities which amounted to the virtual unconditional sur-
render of the National Government’s position and contentions.

The Generalissimo continued that he could not support the state-
ment in the draft prepared by General Marshall and Dr. Stuart re-
garding an unconditional termination of hostilities before his military
and political leaders and further explained that he stood practically
alone in the belief that matters could be settled by peaceful negotiations
and the fighting stopped. The Generalissimo then asked General
Marshall and Dr. Stuart to reconsider their draft in the light of his
statements and advise him accordingly. General Marshall replied
that he would need an opportunity to consider with Dr. Stuart the
points of view expressed by the Generalissimo as he was seriously
concerned whether he should participate, as a representative of the
United States Government, in the preparation of a paper in accord-
ance with the points of view he had indicated, which were contrary
to the views of General Marshall and those, he thought, of the United
States Government.

In submitting a redraft of the statement to the Generalissimo on
November 8, General Marshall stated that it should be clearly under-
stood that the redraft did not have his approval as a representative of
the United States Government. He continued that he had merely
endeavored to help the Generalissimo as staff officers might assist him
in drafting his views in the least provocative manner but that the
redraft did not have his approval since he was in almost complete dis-
agreement with the attitude of the Government military leaders.

The statement issued by the Generalissimo on November 8 was modi-
fied, but the method proposed for stopping the fighting was incon-
clusive and still held, in effect, a threat of renewed battle to force a

206

U. S. RELATIONS WITH CHINA

political decision. 49 * 1 The statement expressed hope that the State
Council would be reorganized while the final redraft prepared by Gen-
eral Marshall and Dr. Stuart had indicated that it should be reorgan-
ized in order to carry out its functions for the reorganization of the
Government in accordance with the PCC resolutions. This would in-
clude the reorganization of the Executive Yuan, but the Generalis-
simo’s statement merely said that such a reorganization would not take
place prior to the meeting of the National Assembly and made no
mention of the PCC resolutions. As a result of a meeting between
General Chou En-lai and the Third Party Group, the former, under
date of November 8, forwarded to General Marshall a letter 50 which,
in effect, constituted a reply to the eight-point proposal of the Gen-
eralissimo. The letter was noncommittal and referred only casually
to the eight points, but it did hold open the door for continued negotia-
tions and peace. General Marshall transmitted a copy of this letter to
the National Government on the same day.

CEASE-FIRE ORDER BY THE NATIONAL GOVERNMENT

During the period preceding the announcement by the Generalis-
simo of his issuance of a cease-fire order to Government troops, there
had been no improvement in the military picture. Fighting continued
in North China and the Government forces occupied Tunghua in Man-
churia, which had been one of the cities from which the Government
had demanded the withdrawal of Communist forces at the time of
the Generalissimo’s absence in Formosa. Another factor of consider-
able importance in the situation was the decreased effectiveness of the
Executive Headquarters as a result of the vicious Communist propa-
ganda attacks on the Americans and the anti-American demonstra-
tions and campaigns staged in Communist-held areas.

The issuance by the Generalissimo of a cease-fire order set the
stage, however, for the convening of the National Assembly against a
background of peace. The Government approach to the National
Assembly was not, however, sufficiently in accordance with the PCC
resolutions and meant that, if all the delegates appeared, the
Kuomintang would have an overwhelming majority, and a simple
majority vote could determine the character of the constitution with-
out much consideration of the fundamental guarantees agreed to in
the PCC. The Government had been unwilling to agree to any tem-
porary adjournment after the formal convocation, as proposed by
General Marshall and Dr. Stuart, and had passed up an excellent

40a See annex 108.
60 See annex 109.

THE MISSION OF GENERAL GEORGE C. MARSHALL 207

opportunity of capitalizing in a conciliatory manner on the proposal
to stop the fighting.

CONVENING OF THE NATIONAL ASSEMBLY, NOVEMBER 15, 1946

On November 10 the National Government requested a meeting of
the Committee of Three. In view of the failure to reach any agree-
ment regarding the National Assembly, General Chou En-lai was
reluctant to attend the meeting but finally agreed to an informal
meeting which was held on November 11.

General Chou En-lai stated that it appeared futile to proceed with
arrangements for the termination of hostilities when unilateral action
of the Government in convening the National Assembly contrary to
the PCC resolutions meant a definite “split” in China. After the
Government representative presented its proposal in detail, General
Chou finally agreed to transmit the proposal to ^enan for prompt
reply and indicated that he would study the matter and proceed on
the basis that whatever the political impasse at this time, he would
join in working for an agreement for the formal termination of
hostilities.

Meanwhile an informal meeting of the PCC Steering Committee
was held, the first since April 24, at which the Communist Party
requested a postponement of the National Assembly until the end of
November. This request was transmitted to the Generalissimo by a
prominent nonparty member of the Third Party Group.

The PCC Steering Committee also practically reached agreement
on the composition of the State Council and the Committee appeared
to have agreed that the reorganization of the Executive Yuan should
be planned for prior to the National Assembly but not announced until
after the adjournment of the Assembly. At this point the Govern-
ment stopped the meetings of the Committee, but an informal meeting
was held on November 12 which may have had some connection with
the decision by the Generalissimo on November 11 to delay the conven-
ing of the National Assembly for three days. He informed Dr. Stuart
that at the urgent request of the non-party delegates he had agreed to
this postponement and that they had promised that, if such a delay
were granted, the Third Party Group would submit their lists of
delegates and possibly the Communist Party would also do so. The
Communist Party informed the Government, however, on November
12 that it would not participate in nor did it approve of the National
Assembly since it had been convened and also postponed unilaterally
by the Kuomintang.

The National Assembly was formally convened on November 15
with a decidedly limited representation from non-Kuomintang groups.

208

U. S. RELATIONS WITH CHINA

The names of additional delegates from non-party and Youth Party
personnel were submitted on the night of November 15, but the Com-
munist Party and the Democratic League were not represented. The
postponement for 3 days had resulted in the promise of attendance by
some of the Third Party Group, but it had had the effect of disrupting
the unity of action of that Group and had seriously, if not fatally,
weakened their influence for good as a balance between the two major
parties.

The address of the Generalissimo at the opening of the Assembly
was mild in tone and was devoted chiefly to the achievements and
objectives of the National Government. 51 General Chou En-lai, how-
ever, on November 16 issued a statement to the press regarding the
National Assembly, in which he was strongly critical of the Kuomin-
tang, charged that its action in convening the Assembly was contrary
to the PCC resolutions, and gave notice that the Communist Party did
not recognize the Assembly. He also stated that the door of negotia-
tions had been “slammed” by the Kuomintang authorities. 52

THE END OF AMERICAN MEDIATION

General Chou En-lai called on General Marshall on November 16
and asked for transportation for himself and other Communist rep-
resentatives to Yenan during the following week. He indicated that
he was leaving some members of the Communist delegation at Nanking
and that he expected to study the situation with the Communist leaders
at Yenan. He expressed the wish that the Executive Headquarters be
continued for the time being even though there was little it could do.
He expressed fear that the National Government would undertake
offensive operations against Yenan and said that if this occurred it
would mean the end of all hope for a negotiated peace. He also asked
that transportation be provided for Communist personnel in the Ex-
ecutive Headquarters in Peiping and Changchun and in Nanking and
Shanghai to evacuate them to points of safety. General Marshall
stated that American planes would be provided for the purposes re-
quested by General Chou and added that, while he had had no infor-
mation of National Government plans for an attack on Yenan, he
would deplore such action and oppose it strongly. He also said that
if such an attack occurred he would consider that it terminated his
mission.

In conclusion, General Marshall asked General Chou En-lai to take
up with the Communist leaders the question of his continued media-
tion. He said that it was useless for him to endeavor to mediate if he

81 See annex 110.

82 See annex 111,

THE MISSION OF GENERAL GEORGE C. MARSHALL 209

were not trusted as being sincere in an effort to be impartial and that
under such circumstances it would be useless for him to remain in
China. General Marshall stated that he wished General Chou to
determine formally from the Communist leaders at Yenan whether
specifically they wished him to continue in his mediation role and asked
that the matter be viewed as a plain business proposition without re-
gard to Chinese considerations of “face” since he was not interested
in “face.” He explained that his sole interest was the question of
whether he could render some service to China by way of mediation.
General Chou stated that he sympathized with the request by General
Marshall and that he would place the question before the appropriate
Communist authorities at Yenan.

General Chou En-lai departed for Yenan on November 19 in a
United States Army plane. His departure brought to an end the
long period of negotiations and discussions begun in January 1946.
The door had not been closed to further negotiation by either side,
but it seemed likely that a fredi start would have to be made before
there would be any possibility of bringing about an understanding be-
tween the two parties. The attitude of the Communist Party and the
Democratic League indicated their belief that the PCC resolutions
had been totally destroyed and that it would be necessary to con-
vene another conference of all parties similar to that held in January.

It seemed apparent to General Marshall that the Government mili-
tary leaders were in the saddle and were thoroughly convinced that the
Communists would not carry out any agreement reached. The strong
political clique in the Kuomintang was firmly convinced that the Com-
munists would merely disrupt any government in which they partici-
pated. With these two forces working together and the Communist
repulse of every overture General Marshall and Dr. Stuart had per-
suaded the Government to make, the existing tragic situation had
developed. It seemed to General Marshall that the Government
had been using the negotiations largely for its own purposes. Follow-
ing the breakdown of the negotiations in June, the Government had
been waging war on a constantly increasing scale, heavily absorbing
Government funds. These military expenditures, which were con-
suming about 70 percent of the total Government budget, served to in-
crease inflation at the same time the Chinese Government was asking
the United States for large loans.

The expanded currency continued to go into commodity speculation
and hoarding on an increasing scale, and wholesale prices had risen
about seven times during the year. In an abortive effort to combat in-
flation by absorbing currency from circulation, the Government

210

U. S. RELATIONS WITH CHINA

engaged in heavy sales of gold taken from its reserves. In addition,
despite the very considerable imports that were made available
through Unrra and other foreign aid measures, the Government’s
foreign exchange reserves were drawn on to procure imports for which
the depressed level of exports and inward remittances had failed to
provide the necessary means of payment. At the end of 1946, official
Chinese reserves of gold and United States dollars had been depleted
by approximately 450 million dollars, or about 50 percent.

On the other side, the Communist Party had, in General Marshall’s
opinion, defeated itself through its own suspicions, refusing to agree
to possible procedures which might well have resulted in a settlement
of the issues. This had been particularly true of its rejection of the
proposal for the Five-Man Committee under Ambassador Stuart,
which might have led to organization of the State Council and the
carrying out of the other PCC agreements, and of its almost con-
temptuous rejection of the Kalgan truce proposal. It had miscon-
strued each overture arranged by General Marshall and Dr. Stuart
and had apparently been convinced by its own campaign of public
misrepresentation of American intentions and actions. It also chose
to ignore in discussion and in criticisms of Government actions its
own military and other actions that were violations of agreements.

At this time a high-ranking Government official was urging upon
General Marshall the need for American financial assistance to meet
the serious economic situation. General Marshall was very emphatic
in stating to him that it was useless to expect the United States to
pour money into the vacuum being created by the Government military
leaders in their determination to settle matters by force and that it
was also useless to expect the United States to pour money into a
Government dominated by a completely reactionary clique bent on
exclusive control of governmental power.

Another ranking Government official approached General Marshall
at this time in regard to action taken by the Export-Import Bank to
reject General Marshall’s recommendation, approved by the Depart-
ment of State, for the extension of loans for the Canton-Hankow
Railway and for the Yellow River bridge in north Honan. General
Marshall explained that the Bank had given as the reason for this
action that there was not sufficient prospect of amortization to justify
the loans. When the Government official said that he did not under-
stand why the loans had been rejected since they had nothing to do
with the Government military campaign, General Marshall pointed
out that it was the open corruption of the Government as well as its
military policy which entered into consideration.

THE MISSION OF GENERAL GEORGE C. MARSHALL 211

GENERAL MARSHALL’S VIEWS ON THE SITUATION IN CHINA

On December 1 General Marshall held a long conference with the
Generalissimo, which revealed the wide divergence of their views on
what course should be followed to reach a peaceful settlement in China.
General Marshall pointed out that in his opinion the complete distrust
of the National Government in the good intentions of the Communist
Party during the past spring had been replaced by an overwhelming
distrust on the part of the Communists of the good intent of any
proposal advanced by the Government toward a peaceful settlement
of the differences. In the recent negotiations, General Marshall and
Ambassador Stuart had found it impossible to convince the Commun-
ists of the good intentions of the Government or even of the integrity
of action of the American mediators. It was General Marshall’s view
that even the most tolerant approaches of the National Government, no-
tably that represented by the Generalissimo’s eight-point proposal of
October 16, had been neutralized by military action — in this particular
case an attack on Antung and Chefoo at the time of the announcement
of this proposal. In regard to the economic situation General Marshall
pointed out that military expenditures were reported to be consuming
about 70 percent of the National Government’s budget, thus creating a
vacuum in Government assets in order to support extensive military
efforts at the same time that he was being pressed to recommend vari-
ous loans by the United States Government. He informed the Gen-
eralissimo that in the event of a financial collapse the Kuomintang
would be imperiled and a fertile field would be created for the spread
of communism. General Marshall observed that the National Govern-
ment’s military commanders in the field were wholly unaccustomed to
any consideration of financial restrictions. He said that the Commun-
ists were aware of the approaching crisis and that this entered into
their calculations in forming plans. Directly opposed to this economic
problem was the view of the National Government military leaders
that the issues could be settled by force. General Marshall said that
he not only disagreed with this view from a military standpoint but
also felt that before sufficient time could elapse to prove the accuracy
of such a view there would be a complete economic collapse. He
pointed out that the inability of the National Government to keep open
the railway between Tientsin and Chinhuangtao since the withdrawal
of the United States Marines in September was one example; another
was the fact that sections of Hopei Province, presumably reoccupied
by the National Government forces, were still dotted throughout with
Communist headquarters. General Marshall summed up the situation
with the statement that the Communists were too large a military and

212

U. S. RELATIONS WITH CHINA

civil force to be ignored and that, even if one disregarded the brutality
of the inevitable procedure necessary to destroy them, they probably
could not be eliminated by military campaigning. He believed, there-
fore, that it was imperative that efforts be made to bring them into the
Government and that the greatest care should be taken to avoid hav-
ing military action disrupt the procedure of negotiations.

The Generalissimo said that he was firmly convinced that the Com-
munists never intended to cooperate with the National Government
and that, acting under Russian influence, their purpose was to disrupt
the National Government. He felt that it was necessary to destroy the
Communist military forces and believed that if this were done there
would be no difficulty in handling the Communist question. He went
on to say that the situation was different from that existing during
early campaigns against the Communist forces in that roads were
available this time to permit freedom of military movement; he felt
confident, therefore, that the Communist forces could t>e exterminated
in from 8 to 10 months. The Generalissimo, referring to the economic
situation, said that, while it was more serious in the cities, the Chinese
economy was based largely on the agrarian population and there was
no danger for a long time of an economic collapse. 83

At this point General Marshall briefly, but firmly, restated his view
that this large Communist group could not be ignored and that the
National Government was not capable of destroying it before the
country would be faced with a complete economic collapse. General
Marshall did not discuss what was to him of vital concern : the possi-
bility of a collapse of the Kuomintang and the evident growing dis-
approval of the character of the local government, or misgovernment,
that the Kuomintang was giving the country.

Under date of December 4 the Communist representative at Nan-
king forwarded to General Marshall a message from General Chou
En-lai at Yenan setting forth, for transmission to the Generalissimo,
the Communists’ terms for reopening negotiations: 54 (1) the disso-
lution of the National Assembly and (2) the restoration of troop
positions held as of January 13 in accordance with the cessation of
hostilities agreement. General Marshall forwarded a copy of this
message without comment to the National Government. General
Chou En-lai’s message made no reply to General Marshall’s request
for an indication by the Communist Party of its attitude toward his
mediation efforts and posed conditions which the National Govern-
ment obviously could not be expected to accept. It appeared that the
Communist Party had, in effect, rejected American mediation.

03 See below, pp. 220-229.

M See annex 112.

THE MISSION OF GENERAL GEORGE C. MARSHALL 213

The Generalissimo had in early December indicated the Chinese
Government’s desire to obtain General Marshall’s services as an ad-
viser. General Marshall had declined the offer since he believed it
unreasonable to expect that his services as adviser to the National
Government could materially promote a beneficial reaction within the
Government when as a mediator with full backing from the United
States Government he had been unable to influence the Chinese Gov-
ernment. General Marshall was struggling with two problems — the
power of the reactionaries in the Government and the difficulty of
dealing with the Communist Party with its immense distrust of the
Kuomintang. The best defense against communism in his opinion
was for the existing Government in China to carry out reforms which
would gain for it the support of the people. He was concerned over
the destructive influence of the reactionaries in the Government and
felt that the Generalissimo’s own feelings were so deep and his asso-
ciations of such long standing that it was most difficult to separate
him from the reactionary group. He considered that the solution
called for the building up of the liberals under the Generalissimo
while at the same time removing the influence of the reactionaries.
In considering the Generalissimo’s desire for American advice, Gen-
eral Marshall felt that American advice could be helpful in many
matters but that corruption within the Government could not be
eliminated through advice but rather through the existence of an
effective opposition party.

He therefore endeavored, in conversations with National Govern-
ment leaders, to emphasize the importance and necessity of the adop-
tion by the National Assembly of a constitution in keeping with the
PCC resolutions, which would be at least an initial step in the direc-
tion of representative government in China. It was the opinion
of General Marshall that if this kind of constitution were adopted
and the State Council reorganized with seats left vacant for the
Communists and the Democratic League, and if the reorganization of
the Executive Yuan were then begun, it might be possible to discuss
with the Communists ways of their coming into the National Assembly.

In furtherance of the idea of endeavoring to build up a liberal group
in China to a position of influence, General Marshall took every oppor-
tunity in conversations with minority and non-party Chinese to em-
phasize the necessity of the unification of the minority parties and the
organization of a liberal group which could serve as a balance between
the two major parties. He pointed out that the liberal Chinese should
band together in a single liberal patriotic organization devoted to the
welfare of the people and not to the selfish interests of minority party
group leaders. They would then be able to exert influence in the

214

U. S. RELATIONS WITH CHINA

political situation, an influence which would increase as the group
gained prestige. Such a group could stand between the Kuomintang
and the Communist Party and neither of them could normally take a
decisive step without the support of the liberal party. The minority
parties, however, had allowed themselves to be divided and were con-
sequently unable to influence the situation or prevent the use of military
force by the Government or the promotion of economic collapse by the
Communists. In the midst of this deplorable situation stood the
Chinese people alone bearing the full weight of the tragedy.

In conversations with the Generalissimo at this juncture General
Marshall noted definite inconsistencies. The Generalissimo said
that he would do everything he could to bring the Communists
into the Government by peaceful negotiation, but when discus-
sing the question of reopening the two main railways in North
China he said that it was useless to attempt to negotiate with the
Communists on this question, which would have to be solved by force.
He also said that if the railways were taken by force, the Commu-
nists would then be compelled to come to terms. He had taken a sim-
ilar attitude in June, when he had said that “given time, the ripe
apple will fall into our laps,” and again in August, when he had said
that “if hostilities are stopped, there would be no way to force the
Communists to attend the National Assembly.”

THE WORK OF THE NATIONAL ASSEMBLY

Following the departure of General Chou En-lai for Yenan and the
termination of the negotiations, attention was centered chiefly on the
National Assembly and the question of the type of constitution it
might adopt. There were early indications that the Kuomintang re-
actionaries were opposed to the adoption of a constitution along the
lines of the PCC resolutions and that they were endeavoring to obtain
approval of the May 5, 1936 constitution in substantially unchanged
form. These circumstances required that the Generalissimo take a
strong stand if the constitution to be adopted were to be in general
accord with the PCC resolutions.

The Generalissimo did exercise a determined personal leadership,
assisted by almost all other groups and individuals in the Assembly,
in opposing the extreme right-wing clique. The Assembly adjourned
on December 25 with the Generalissimo in full and confident control of
the situation, having demonstrated his ability to override the Kuo-
mintang reactionaries and having restored his prestige through his
action in securing the adoption of a constitution of a democratic
character in reasonable accord with the PCC resolutions.

THE MISSION OF GENERAL GEORGE C. MARSHALL 215

While the new constitution was on its face a democratic document,
General Marshall was concerned with the degree and manner of its
enforcement. The passage of the constitution was only the beginning
and the only guarantee of an honest reorganization of the Government
and a genuine enforcement of the constitution lay in the development
of a truly liberal group in China. General Marshall feared that if the
minority and non-party liberal groups continued to operate individu-
ally, the reorganization of the Government might be a synthetic one.
He continued, therefore, to emphasize the importance of the organiza-
tion of the Chinese liberals into an effective force, which would have
as its objective the support of whatever appeared to be a good govern-
ment.

THE COMMUNIST PARTY’S REACTION

The Chinese Communist Party was apparently adamant in re-
fusing to recognize the National Assembly and the new con-
stitution and on demanding the acceptance of its two conditions as
prerequisites to further negotiation. Communist propaganda attacks
on the United States grew stronger during this period and Communist
spokesmen indicated the probable Communist strategy — the use of
constant harassing tactics on Kuomintang weak points to prevent the
reopening of lines of communication and the refusal of further nego-
tiation until the Government had become weakened by economic deteri-
oration. The Communists still had made no reply to General
Marshall’s inquiry regarding his mediation role.

Although there appeared to be slight prospect for the renewal of
negotiations, General Marshall and Ambassador Stuart, pursuant to
the Generalissimo’s request, suggested that definite proposals be pre-
sented to the Communist Party without any attendant publicity.
They indicated that, with the adoption of a sound constitution, if the
Government proceeded with the establishment of the State Council
and began a genuine reorganization of the Executive Yuan, the Gen-
eralissimo might send a few representatives of importance and liberal
standing to Yenan to discuss with the Communists the question of
reopening negotiations for the cessation of hostilities and Communist
participation in the reorganization of the Government. However,
before the good faith of the Government had been at least partially
established by the adoption of a constitution in accord with the PCC
resolutions, news of the Government purpose had become known. The
Communist reaction was unfavorable and there were indications that
they would resent reorganization of the State Council and the Execu-
tive Yuan prior to consultation with them, apparently feeling that this

216

TJ. S. RELATIONS WITH CHINA

would close the door on any possibility of responsible participation on
their part.

On December 27 General Marshall, in reply to the Generalissimo’s
request for his comments on the situation, made the following remarks :
It was unlikely that the Communists would commit themselves to an
agreement at this time due to their overwhelming suspicion that it was
the Government’s intention to destroy them by military force. The
Government’s military commanders had erred considerably in their
optimistic estimate of what they could achieve toward suppression
of the Communists. They had stated in June that Kiangsu Province
would be cleared of Communist forces within two months and the
Province had not yet been cleared. At the same time they had said
that the Communists could be brought to terms from a military stand-
point within three months. That had not occurred after six months.
The Government refusal to terminate hostilities in order to force the
Communists to participate in the National Assembly had failed of its
purpose. If the Communists would not renew negotiations, the Gov-
ernment should go ahead with the reorganization, leaving the door
open for Communist and Democratic League participation. The
Generalissimo, by his leadership in the National Assembly in opposing
the reactionaries and securing the adoption of a reasonably sound
constitution, had gained a great moral victory which had rehabili-
tated, if not added to his prestige. It was most important, therefore,
that he demonstrate at this time that the new constitution was not a
mere collection of words and that he was determined to institute a
democratic form of government. He must by his own indirect leader-
ship father a coalition of the minority groups into a liberal party,
since, unless such sizable minority groups existed, his efforts in the
National Assembly to secure a sound constitution would be regarded
as mere camouflage for an intention to proceed with one-party govern-
ment. The various minority groups could not of themselves manage
an amalgamation and such action would require his active assistance.
He should also call on the minority party leaders to nominate men for
various posts rather than follow previous practices of neutralizing
the opposition leaders by bribing them with attractive appointments.
If he did not take such action, there could be no genuine two-party
government and his integrity and position would be open to serious
attack. The organization of the minority parties into a large liberal
group would assist him greatly and he could place himself in the
position of the father of his country rather than continue merely as
the leader of the Kuomintang one-party government.

THE MISSION OF GENERAL GEORGE C. MARSHALL 217

VIII. THE END OF THE MARSHALL MISSION

GENERAL MARSHALL’S REFUSAL TO CONTINUE AS MEDIATOR

General Marshall remained in China during this period in the hope
that he might be able to use his influence toward the adoption of a
genuinely democratic constitution. In the past he had often felt that
the National Government had desired American mediation as a shield
for its military campaigns and at this time the Communists had no
desire for further American mediation but feared being placed in an
unfavorable position if they were to reject formally such mediation.
He was not willing to allow himself thus to be used by either party,
nor did he intend to serve as an umpire on the battlefield. He felt
that his continued usefulness as a negotiator had practically been
wrecked by the recent Communist rejection of all Government over-
tures, actions which played directly into the hands of the reactionaries
in the Government, from whom his chief opposition had always come.

General Marshall was of the opinion that, if the Communists declined
to reopen negotiations and repulsed the Government’s overtures, the
Executive Headquarters should be dismantled. He also believed that
he should be recalled to give a first-hand report to the President on
the situation. It was his hope that by issuing a very frank statement
at the time of his recall he might be able to weaken the power of the
reactionaries and strengthen the position and influence of the better
elements, and he believed that the time had come when it was going
to be necessary for the Chinese themselves to do the things he had
endeavored to persuade them to do. He hoped, therefore, that by a
frank statement of Chinese Communist misrepresentations and vicious
propaganda against the United States he might be able to give some
guidance to misinformed people both in China and in the United
States.

GENERAL MARSHALL’S RECALL AND FINAL STATEMENT

On January 6, 1947, the President announced that he had directed
General Marshall to return to Washington to report in person on the
situation in China. General Marshall left China en route to the United
States on January 8, and shortly after his departure the Department
of State made public the personal full and frank statement referred
to above. The greatest obstacle to peace in China, the General stated,
was the almost overwhelming suspicion with which the Kuomintang
and the Chinese Communists regarded each other. Other important
factors which he blamed for the breakdown of negotiations included

218

IT. S. RELATIONS WITH CHINA

the opposition of the dominant group of Kuomintang reactionaries, the
efforts of the extreme Communists to produce an economic situation
which would facilitate the overthrow or collapse of the Government,
and the dominating influence of the military in China. “The salvation
of the situation,” he reported, “would be the assumption of leadership
by the liberals in the Government and in the minority parties and suc-
cessful action on their part under the leadership of the Generalissimo
would lead to unity through good government.” 65

In conclusion, General Marshall said that he had spoken very
frankly because in no other way could he hope to bring to the Amer-
ican people even a partial understanding of the complex problem and
that he was expressing his views publicly, as was his duty, to present
his estimate of the situation and its possibilities to the American people.

Prior to his departure from China, General Marshall had conver-
sations with several high-ranking Government officials. He stressed
the necessity of removing the dominant military clique and the re-
actionaries from the Government structure. He explained that the
frank statement he expected to make would arouse bitterness, par-
ticularly among the radicals, the reactionaries and the irreconcilables.
He said that he had exerted every effort to create an opportunity for
the better elements in China to rise to the top, and he hoped that his
statement would assist in making possible the organization of a pa-
triotic liberal group under the indirect sponsorship of the General-
issimo. He continued that he considered such action imperative from
the standpoint of the Generalissimo since he needed a respectable op-
position party in order to prove to the world his sincerity in establish-
ing a democratic form of government in China. General Marshall
pointed out that such an opposition party would be a strong force for
good, which the Generalissimo could use to wipe out graft, corrup-
tion and incompetence in the Government and in the Kuomintang and
which would provide an effective check on the existing dictatorial
control of the military leaders.

PRESIDENT TRUMAN’S STATEMENT OF DECEMBER 18, 1946

Shortly before General Marshall’s recall to Washington, Presi-
dent Truman on December 18, 1946, after full consultation with his
Special Representative in China, issued a further statement on China.
He reaffirmed American policy as laid down in his statement of Decem-
ber 15, 1945, and reviewed events in China in relation to that policy
during the intervening year. He restated the American belief that a
“united and democratic China” was of the utmost importance to world
peace and that a broadening of the base of the Chinese Government

See annex 113 for full text.

THE MISSION OF GENERAL GEORGE C. MARSHALL 219

to make it representative of the Chinese people would further China’s
progress toward that goal. He expressed deep regret that China had
not yet been able to achieve unity by peaceful methods but hoped that
the Chinese Government would yet find a solution. He characterized
as still sound the plans for political unification and military reorgan-
ization agreed upon early in 1946 but never fully implemented. Stat-
ing that the United States would give careful and sympathetic consid-
eration to ways and means which were presented for constructive aid
to China, the President laid down a continued policy of avoiding in-
volvement in Chinese civil strife and of persevering in a policy of
“helping the Chinese people to bring about peace and economic re-
covery in their country.” 66

The Kuomintang press generally interpreted this statement as an
endorsement of the National Government’s policy and position while
the Communist Party radio attacked it as “mainly an apology for
the United States Government’s reactionary policy toward China
since March of this year.”

AMERICAN WITHDRAWAL FROM THE COMMITTEE OF THREE AND
EXECUTIVE HEADQUARTERS

On January 7, 1947, President Truman announced the nomination
of General Marshall as Secretary of State. Shortly after General
Marshall’s assumption of office the decision was reached to terminate
the connection of the United States with the Committee of Three and to
withdraw American personnel from Executive Headquarters. 57 This
action made it possible to withdraw all United States Marines
from North China, except for a guard contingent at Tsingtao,
the location of the United States Naval Training Group engaged in
training Chinese naval personnel. In issuing an announcement re-
garding the termination of the Executive Headquarters, the National
Government expressed its appreciation of the American efforts to
achieve peace and unity in China.

CONCLUSION

The termination of the American mediation effort did not change
the traditional attitude of the United States toward China. That
effort had failed to bring peace and unity to China. There was a
point beyond which American mediation could not go. Peace and
stability in China must, in the final analysis, be achieved by the
efforts of the Chinese themselves. The United States had endeavored
to assist in attaining those goals and in the process had been sub-

86 See annex 114.

67 See annex 115.

220

U. S. RELATIONS WITH CHINA

jected to bitter attack by many groups, both in China and abroad —
attacks which had, deliberately or otherwise, misrepresented the in-
tentions and purposes of the United States Government. The issue at
this point was squarely up to the Chinese themselves. It was General
Marshall’s opinion that only through the existence of a liberal oppo-
sition group in China could there be a guarantee of good government
and of progress toward stability. The future efforts of the Chinese
themselves would determine whether it was possible to give peace and
stability to the people of China. It was General Marshall’s belief
that the United States should continue to view sympathetically the
problem facing the Chinese and should take any action, without inter-
vening in China’s internal affairs, that would assist China in realizing
those aims which represented the hopes and aspirations of the Chinese
people as well as those of the United States.

IX. ECONOMIC DEVELOPMENTS DURING
THE MARSHALL MISSION

EFFECTS OF INTERNAL CONFLICT

The economic situation in 1946, while not decisive, did influence de-
velopments; more importantly, it carried serious implications for the
future and in no small measure indicated National Government capa-
bilities. The discouraging lack of progress toward a political and
military settlement in 1946 was matched by a steady deterioration
of the National Government’s economic position. In contrast to the
relatively bright situation prevailing on V-J Day, China, 16 months
later, was gripped by a mounting inflation, its reserves of foreign
exchange had been partially depleted, and no real beginning had been
made on the task of internal rehabilitation and economic development.
Rather, the outbreak of widespread fighting between Nationalist and
Communist forces had resulted in general damage to mining and
transportation facilities and in the progressive isolation of mineral
and agricultural production from centers of consumption and export.
The nature of the struggle in China made it possible for the Chinese
Communists to better their relative position by tactics aimed at de-
struction and economic stagnation, while the National Government
was faced with the task of attempting to maintain a military front and
economy extending over vast areas and linked by exposed and lengthy
lines of communication. These considerations had been in the mind
of General Marshall when he warned the National Government against
the consequences of a full-scale civil war.

One of the important blows to the National Government’s economic
prospects, however, was not traceable to Chinese actions or, initially,

THE MISSION OF GENERAL GEORGE C. MARSHALL 221

to the outbreak of civil strife- After the Japanese surrender, Russian
occupation forces systematically stripped equipment and parts from
key plants in the Manchurian industrial complex. As a result, China
did not acquire a functioning industrial system in Manchuria, but
rather, a damaged heavy industry, poorly integrated and partially
inoperable. When Manchuria became the first major area of civil
fighting, transport disruption became a chronic problem. The few
railroad lines operating in Nationalist-held areas of Manchuria were
severely handicapped by shortages of rolling stock and by damaging
Communist raids. Cities were separated from the areas from which
they normally obtained their food supplies and fuel. Manchuria
increasingly became a major economic liability to the National Gov-
ernment.

In China proper, the paramount post-war economic problem was
the continuing inflation. During the war with Japan the Govern-
ment had financed a large part of its expenditures by the issuance of
paper currency. The result had been a steady inflation of prices which
in turn had as one of its consequences the destruction of the savings
and the economic position of middle class Chinese. The inflationary
process, far from being arrested in 1946, was accelerated. Wholesale
prices in Shanghai increased more than seven times during the year.
The official exchange rate between the Chinese National currency
dollar and the United States dollar was raised in August from 2,020 to
1 to 3,350 to 1. By December the open market dollar rate had risen
to 6,500 to 1.

Financial policies followed by the National Government were an
important factor in the inflation. Of total Government expenditures
in the postwar period, less than 25 percent were financed through
taxation and other recurring sources of revenue. Another 10 percent
were met by the partial liquidation of official gold and United States
dollar reserves and former enemy properties. The deficit of approxi-
mately 65 percent of the total budget was covered by currency expan-
sion. The course of the inflation was fostered furthermore by a grad-
ually declining public confidence in both the Government and its mone-
tary unit. The resulting general reluctance to hold Chinese currency
impeded the production and movement of goods and induced specula-
tion and hoarding of commodities on a grand scale, all of which served
to intensify greatly the scarcity of commodities brought about directly
by military operations.

It would have been unreasonable to expect the National Gov-
ernment to make the transition from war to peace, involving as
it did the reoccupation of areas long under enemy control, without
a measure of inflation. With the outbreak of civil strife and the re-

222

U. S. RELATIONS WITH CHINA

suiting high level of military outlays, continuing inflation could
scarcely have been avoided. The budgetary and fiscal operations of
the National Government, however, were of such a nature as to accen-
tuate inflationary developments. Government expenditures were
largely uncontrolled. Funds were dissipated by inefficient military
commanders and in the maintenance of excessively large and wholly
unproductive garrison forces. Much of the tax revenue nominally
accruing to the Government failed to reach the Government’s treasury
because of malpractices prevalent throughout the administrative
hierarchy.

DEVELOPMENTS IN CHINA’S FOREIGN EXCHANGE AND TRADE
POLICIES

Associated with the domestic inflation was a steady depletion of
the Government’s foreign exchange reserves. Domestic inflation had
the effect of inhibiting exports and of enhancing the demand for im-
ports which could serve as a hedge against rising prices. In the
months immediately following the Japanese surrender, the Govern-
ment permitted the abnormal demand for imported commodities to
operate without restriction. In March 1946, action was taken to pro-
hibit the importation of certain luxury items and to place a larger
list of non-essential imports under licensing. In November, control
of imports was tightened by an expansion of the prohibited list, by
the imposition of quotas upon important import items and by the
extension of licensing to all other permitted imports.

At the same time, however, the maintenance of unrealistic foreign
exchange rates had the effect of subsidizing imports and penalizing
exports. Moreover, the proliferation of local taxes and other artificial
barriers to domestic trade tended to reduce drastically the flow of
goods into China’s great coastal cities. Thus, the dependence of
Chinese urban areas on foreign imports was greatly increased while
foreign exchange receipts were simultaneously diminished. Other
factors contributing to the unfavorable balance-of -payments position
and a flight of capital abroad included the widespread smuggling of
exports, the undervaluation of declared exports and the transmittal of
inward remittances through illegal channels.

The cumulative result of the various influences bearing upon China’s
import-export position and of the National Government’s policy of
open-market sales of gold as a counterinflationary device was a decline
in official reserves of United States dollar exchange and gold from the
V-J Day level of 900 million dollars to an estimated figure of approxi-
mately 450 million dollars at the end of 1946. This use of official assets

THE MISSION OF GENERAL GEORGE C. MARSHALL 223

unfortunately did not involve an over-all expansion through pur-
chases abroad of productive plant and equipment in China or an
adequate inflow of repair and replacement parts for existing plant.

EFFECTS OF RESTRICTIONS ON TRADE AND SHIPPING

Chinese regulations governing foreign trade and foreign exchange
transactions hampered China’s foreign trade because of the character
of the regulations and their administration as well as because of the
direct restrictions they imposed. These regulations were highly com-
plex, they varied considerably in their application as between different
Chinese ports and they were often made effective immediately upon
their announcement with consequent hardship to importers. It was
recognized that the Chinese were confronted with a situation which
required the husbanding of foreign exchange resources. There was,
however, a general belief among foreign traders that the Chinese
administrative mechanism charged with enforcing trade and exchange
regulations was unnecessarily cumbersome and arbitrary. Charges
were frequently leveled against the Chinese Government for alleged
corruption and favoritism, open or indirect, to privileged Chinese
firms. Some of the complaints of private foreign firms may have
been occasioned by curtailment of trade due to the stringent foreign
exchange situation which affected all business in greater or less degree,
or by the natural tendency, following the relinquishment by foreign
Powers of extraterritoriality, for Chinese firms to be given a larger
share of China’s foreign trade. While due allowance must be made
for these qualifying circumstances, many of the charges of favoritism
and inefficiency appeared to be well grounded.

In the field of shipping, the Chinese Government took the highly
nationalistic position that, contrary to general international practice,
no foreign flag vessels could carry cargoes from abroad to Chinese
ports not designated as ocean ports. This position excluded foreign
flag vessels from the Yangtze River beyond Shanghai and required
transshipment in the Shanghai area of all cargoes being carried be-
tween ports up the Yangtze, such as the major commercial center of
Hankow, and foreign countries. In consequence, the transportation
of such cargoes in Chinese waters was much more costly than it should
have been, and the process of transshipment in the Shanghai area fre-
quently made that port a bottleneck for commodities urgently needed
in the interior of China.

ECONOMIC TREATY RELATIONS

Despite the increasingly severe controls imposed by the Chinese
Government on foreign trade, and the malpractices associated with

224

U. S. RELATIONS WITH CHINA

enforcement of such controls, China contributed during this period to
creating a framework in which effective international economic rela-
tions might eventually be conducted. China’s negotiation of a com-
mercial treaty and an aviation agreement with the United States, and
its adherence to the General Agreement on Tariffs and Trade, were
important steps in this regard. A modern comprehensive treaty of
friendship, commerce and navigation was negotiated in 1946 to re-
place the old treaty of 1903 and other treaties which had been based on
the previously existing extraterritorial arrangements between the
United States and China. Katifications were exchanged and the
treaty became effective on November 30, 1948. The treaty was based on
the principles of mutuality and nondiscrimination ; in general it pro-
vided that each Government shall assure to nationals of the other, with
some exceptions and subject to its general laws, the same treatment and
rights enjoyed by its own nationals and provided also that the na-
tionals of either in the territories of the other shall be entitled to any
rights or privileges which may be granted to the nationals of a third
country. The trade and commerce of the two countries with each other
were also guaranteed similar rights to most-favored-nation treatment.
Thus the treaty was in reciprocal terms and provided for no rights
or privileges for nationals of the United States in China which it
did not equally confer on Chinese nationals in the United States.

Also in 1946 preliminary steps were taken for the negotiation of a
reciprocal trade agreement with China. This agreement was even-
tually consummated in 1947 when the United States negotiated with
China and 21 other countries a multilateral reciprocal trade agree-
ment (the General Agreement on Tariffs and Trade) which reaffirmed
the principle of most-favored-nation treatment, incorporated various
general provisions governing trade relationships and provided for
tariff concessions resulting in mutual reductions or bindings of duties
on certain tariff classifications of the respective countries. This agree-
ment became effective with respect to China on May 22, 1948.

A bilateral air transport agreement between the United States and
China was signed in Nanking on December 20, 1946. This agree-
ment is based on standard clauses drawn up at the Chicago Interna-
tional Civil Aviation Conference of 1944 and incorporates the so-
called Bermuda principles contained in the bilateral air transport
agreement between the United States and the United Kingdom. It
is to be noted that conclusion of the latter agreement in February
1946 marked the establishment of a pattern of air transport agree-
ments which, with slight deviations, the United States has negotiated
ever since. The pattern of these air agreements involves in general
the following factors: routes, privileges (accorded to an air carrier

THE MISSION OF GENERAL GEORGE C. MARSHALL 225

of one nation in the air space of a second) , rates, frequency of opera-
tion, and capacity of aircraft. With the exception of prescribed routes
over which aircraft of each contracting party operate, the remainder
of the agreement is relatively standard and grants full reciprocity to
each signatory country. The bilateral air transport agreements nego-
tiated by the United States are purely commercial aviation agreements
for the reciprocal exchange of commercial air rights. The United
States-China air agreement makes no provision for base rights for
either Government in the territory of the other. Under this agreement
the airlines of each country are accorded the right to operate services
to the other over three different routes. Since the conclusion of the
agreement the United States has utilized two of the routes granted to
it in services to Shanghai, while China has exercised its route privileges
for the operation of a mid-Pacific route to San Francisco.

FOREIGN AID IN 1946

During 1945 and 1946 a series of measures were taken by foreign
governments which provided China with very substantial external
economic aid. 58 The commodities and services made available by these
various measures contributed to meeting China’s abnormal need fol-
lowing the Japanese surrender for food, clothing, medical supplies
and raw materials and provided the capital equipment necessary to
begin the rehabilitation and reconstruction of Chinese agriculture
and of certain key industrial and transportation facilities.

The China program of the United Nations Relief and Rehabilita-
tion Administration represented the largest single measure of foreign
aid to China during this period and was the largest program that
Unrra carried out for any one country. Unrra began its shipments
to China in November 1945 and by the end of that year had shipped
approximately 300,000 tons of supplies. The Unrra program for
China continued throughout 1946 and 1947, and a few deliveries
took place thereafter. The value of goods delivered to China under
the Unrra program, including shipping and insurance costs, is esti-
mated at 658.4 million dollars. The United States contribution to
the world-wide Unrra fund was approximately 72 percent. It may
therefore be said that the United States contribution to the Unrra
China program amounted to 72 percent of 658.4 million dollars, or
474 million dollars. Unrra’s China program consisted chiefly of food
and clothing and of a wide variety of capital goods and materials
important to the rehabilitation of China’s agriculture and industries.
In addition, Unrra provided large numbers of technical and super-

M See annex 181.

226

TJ. S. RELATIONS WITH CHINA

visory personnel who assisted the Chinese in the distribution of con-
sumption commodities and the installation of capital goods.

During the latter part of 1945, the Chinese Government approached
the Export-Import Bank with applications for the extension of cred-
its to cover a variety of rehabilitation needs. No action was taken on
these requests, however, and in January 1946 the National Advisory
Council, acting in accordance with General Marshall’s recommenda-
tions, decided that a major program of financial assistance to China
must await satisfactory political and economic developments in that
country. General Marshall was therefore able to use the possibility
of American economic aid as a bargaining point in trying to achieve
his political objectives. By early 1946, the progress of the negotiations
between the National Government and the Chinese Communists made
it appear that a peaceful settlement might be reached which would pro-
vide a basis for gradual stabilization and rehabilitation of the Chinese
economy. Consequently, the Export-Import Bank gave favorable
consideration, upon the recommendation of General Marshall and the
Department of State, to a number of Chinese applications and during
the first quarter of 1946 authorized a total of 66.8 million dollars in
credits to the Chinese Government. These credits were primarily for
cargo vessels, railway repair materials, electric-power generating
equipment and raw cotton, and they were all on a long-term basis
except for the cotton credit, which was to be repaid in 24 months. A
credit of 16 million dollars previously authorized for the Yungli Chem-
ical Industries was not finalized by guaranty of the Chinese Govern-
ment until 1947. This brought the total of Export-Import Bank
credits actually made available to China after Y-J Day to 82.8 million
dollars.

In recognition of the magnitude of Chinese requirements for recon-
struction and the possibilities for economic development under orderly
conditions, the United States Government gave consideration during
the same period to setting aside substantial funds to assist China in
this task. In April 1946, following the recommendation of General
Marshall and approval by the National Advisory Council, the Export-
Import Bank authorized the earmarking until June 30, 1947, of 500
million dollars of the Bank’s funds for the possible extension of indi-
vidual credits to the Chinese Government and private Chinese in-
terests. It was contemplated that such credits would be confined to
particular projects and would be subject to the usual criteria govern-
ing the Bank’s lending operations. No implementing agreements
were consummated, however, between the Bank and the representatives
of the Chinese Government.

THE MISSION OF GENERAL GEORGE C. MARSHALL 227

During the latter months of 1946, General Marshall and the De-
partment of State recommended favorable consideration of certain
Chinese projects by the Export-Import Bank. The Bank refused at
this time to take favorable action on Chinese credit proposals chiefly
because of the outbreak in mid- 1946 of widespread fighting between
the Chinese Communists and National Government forces and the
clear implications that this development carried for Chinese economic
prospects. In this situation, the Bank was unable to find reasonable
assurances of repayment regarding which it had a statutory obligation.

In February 1946 the Canadian Government extended a long-term
credit of 60 million dollars to the Chinese Government. Of the total
credit, 25 million dollars was to be used to purchase (a) supplies
and equipment originally requested by China from Canada as mutual
aid but undelivered as of V-J Day, (b) other commodities in produc-
tion in Canada on September 1, 1945, which were surplus to Canadian
requirements, and (c) certain used industrial equipment, together
with (d) the cost of reconverting and processing such equipment.
The remaining 35 million dollars of the credit was to be used for
equipment, supplies and services required by the Chinese Government
for reconstruction and other post-war purposes.

The United States extended a credit to the Chinese Government,
somewhat similar to the Canadian credit referred to above, in an
agreement of June 14, 1946, commonly referred to as the Lend-Lease
“Pipeline” Credit Agreement. This agreement provided for the de-
livery on a long-term credit basis, pursuant to section 3 (c) of the
Lend-Lease Act, of civilian-type equipment and supplies contracted
for but undelivered on V-J Day under the wartime lend-lease pro-
gram for China. It was subsequently determined that a total of 51.7
million dollars in equipment and supplies could be furnished under
contracts covered by this agreement.

The sale to China of United States civilian-type war surplus prop-
erty with an estimated procurement value of 900 million dollars was
authorized or recognized under an agreement of August 30, 1946, be-
tween the two Governments. 59 The property was located in India and
China and on 17 Pacific islands and consisted in large measure of small
ships and marine equipment, fixed installations, vehicles of all types,
construction equipment and air-force supplies and equipment. The
remainder of the property comprised a wide variety of communications
equipment, tools, shop equipment, industrial machinery, electrical
equipment, medical equipment and supplies and chemicals. The
agreed realization to the United States for this property was 175 million

69 For the Chinese Communist reaction to this agreement see p. 180.

228

U. S. RELATIONS WITH CHINA

dollars. Of this amount 55 million dollars was to be repaid in Chinese
currency on a long-term credit basis, 20 million dollars of which the
United States Government was in turn to use for cultural and educa-
tional activities in China. The balance of this credit, 35 million dollars,
was to be made available in Chinese currency for acquisition by the
United States Government of real property in China for diplomatic and
consular use and for other American governmental expenses in China.
To this credit was added an agreed offset of 150 million dollars against
the United States wartime indebtedness to China arising out of ex-
penditures by the Chinese Government for the United States Army.
While these considerations totaled 205 million dollars, the United
States as a part of the agreement established a fund of 30 million dol-
lars to be used by China for shipping and technical services arising out
of the property transfer. This 30-million-dollar fund reduced the total
United States realization to the net figure of 175 million dollars

In October 1945 the Government of China had presented to the
United States a proposal for technical collaboration in agriculture
and forestry. In the course of the ensuing discussions it was agreed
to establish a joint China-United States Agricultural Mission to
make an intensive study of the problems of agricultural improve-
ment in China, with special attention to be given those agricultural
commodities which play an important role in Sino- American trade.
The President of China stressed the importance of the mission’s
assignment and technical collaboration in general in a letter to the
President of the United States which read in part as follows :

“We have been for centuries primarily an agricultural nation.
The farmer is traditionally regarded with affection and respect.
During recent times, unfortunately, our agricultural technique has
fallen behind due to delay in the adoption and application of new
scientific methods. I am keenly conscious of the fact that unless and
until Chinese agriculture is modernized, Chinese industry cannot
develop ; as long as industry remains undeveloped, the general econ-
omy of the country cannot greatly improve. For this reason, I
heartily agree with you that any plan for cooperation in economic
development between our two countries should include agriculture.”

The United States Government dispatched 10 agricultural experts
to China for the mission, the Government of China appointed 13 and
work was commenced on June 27, 1946. Conferences were held with
Government officials, businessmen and agricultural specialists at
Shanghai and Nanking, and field trips were made through 14 prov-
inces and the island of Taiwan. One group concentrated on the broad
aspects of the mission’s assignment — education, research, and rural

THE MISSION OF GENERAL GEORGE C. MARSHALL 229

economic and social problems — while other smaller sections studied
the production and marketing of specific commodities including tung
oil, silk, tea, carpet wool and fish.

The mission submitted its report jointly to the two Governments
late in 1946, and its recommendations were received by the United
States Government as the conclusions of independent technical
experts.

The report outlined in some detail a comprehensive and long-range
program that the Chinese Government might undertake for the im-
provement of China’s agriculture. The mission’s recommendations
included the following points : (1) greater emphasis on fertilizer pro-
duction, development of irrigation, improvement of plants and
animals, development of forestry, and production of fruits, vegetables
and livestock to improve diets; (2) adjustment of the exchange rate,
reduction in costs of transportation and credit, and improvement of
standardization and quality to encourage the production and export
of important agricultural commodities; (3) provision of adequate
farm credit, improvement of tenancy conditions, advancement of land
surveys, registration, and appraisal, and enforcement of the Land Law
of 1946 with respect to taxation of land; (4) furthering of programs
relating to general education, public health, transportation, river con-
servancy, and flood control; (5) emphasis on agricultural instruction,
research and extension work within an integrated system; (6) creation
of a single Government bank to serve agricultural needs; (7) con-
sideration of measures to guard against a rapid increase in the growth
of population.

In his statement of December 18, 1946, President Truman had
renewed the offer of American assistance in implementing the recom-
mendations of the mission in so far as feasible.

Despite the continuing efforts of the American Government to elicit
Chinese action few constructive measures were taken by the Chinese
Government in the field of agricultural improvement. Several of the
recommendations of the Joint Mission, however, were later embodied
in the program of the Joint Commission for Rural Reconstruction in
China, established under the terms of the China Aid Act of 1948. 60

60 See chapter VIII.

CHAPTER VI

The Ambassadorship of John Leighton
Stuart, 1947-1949

I. THE POLITICAL AND MILITARY SITUATION

FURTHER EFFORTS AT NEGOTIATION

The American mediation effort described in chapters III and V had
ended, but the Chinese Government did not at once cease its attempts
to find some method for the resumption of political negotiations. On
January 15, 1947, the Generalissimo informed Ambassador Stuart that
he had been meeting for several days with prominent Government
leaders in an attempt to determine some means of reopening negotia-
tions. These consultations resulted in four agreements within the
Chinese Government which were given to the Ambassador. The points
listed were as follows :

(1) The National Government desired to send a delegation to
Yenan or would invite the Communist Party to send one to Nanking
to continue discussions, or it would agree to a round-table conference
at any mutually acceptable place.

(2) The Government and the Communists should at once issue a
ceaserfire order and confer on its implementation.

(3) The Government desired to resume discussions of practicable
plans for the reorganization of the army and the restoration of com-
munications based on the principles of the Committee of Three.

(4) The Government expressed a desire to reach an immediate
agreement with the Communists on the political control of disputed
areas.

The Generalissimo asked the Ambassador to get in touch with the
principal Communist delegate still in Nanking, Mr. Wang Ping-nan,
to ascertain if the Communists would invite a Government peace
delegation to Yenan. Dr. Stuart was specifically requested not to
disclose the foregoing four points, but if asked he could say that
tentatively General Chang Chih-chung, Governor of Sinkiang, would
represent the Government. Dr. Stuart could also state, if asked,
that the Government attached no conditions to peace discussions. It
230

AMBASSADORSHIP OF JOHN LEIGHTON STUART

231

was the avowed hope of the Generalissimo that discussions without
conditions might be more fruitful than previous ones and that the
original spirit of the Political Consultative Conference agreements
could be recaptured.

On January 16 the Ambassador saw Wang Ping-nan, who asked the
anticipated questions and received the replies which the Generalissimo
had authorized. The Ambassador took particular pains to make it
clear that he was acting only as a transmitting medium and not as
a direct participant. The Chinese Communist reply was prompt and
categorical to the effect that if the Government would agree to the
two previously stipulated conditions (that is, the abrogation of the
constitution and the restoration of the military positions held Janu-
ary 13, 1946, the effective date of the cease-fire agreement) the negoti-
ations could be resumed in Nanking; if not, nothing could be gained
by sending a delegation to Yenan. The Communist representative
insisted, however, that this reply was not intended to break off negoti-
ations but rather to clear the ground for subsequent resumption. The
Ambassador on January 23 informed the Department of State that it
was his belief that the Chinese Communists meant what they said on
this point as they were militarily confident and believed that the
Government would be forced within the ensuing few months to reopen
discussions on Communist terms.

On January 20 the Ministry of Information, on behalf of the
National Government, published a long statement outlining the course
of negotiations with the Chinese Communists. It stated, int&r alia:

“As far back as the beginning of the war of resistance, in order to
pool together the nation’s efforts, the Government called the People’s
Political Council consisting of representatives of all political parties
and independents.

“From start to finish, the Government has regarded the Communist
problem as a political problem. The Kuomintang at its Tenth Cen-
tral Executive Committee Plenary Session in 1942 and Eleventh
Plenary Session the following year persistently advocated an early
solution through political means.

“After May 1944 the Government has been negotiating with the
Communist Party without let-up in the hope that a peaceful settle-
ment could be reached.”

The Ministry of Information concluded its statement with the an-
nouncement that the Chinese Government would make another appeal
to the Chinese Communists for additional conversations and listed the
four-point proposal, which had previously been communicated to the
Communist representatives. The Communists replied publicly on

232

U. S. RELATIONS WITH CHINA

January 29, charging that the four points of the Government were
nothing but a fraud which rejected the real prerequisites for peace
negotiations. The Communists refused to accept the Nationalist
offer until their previous two conditions, namely abrogation of the
constitution and a return to the military status quo of January 13,
1946, had been accepted. On the following day the Nationalist
Ministry of Information repeated its previous offer but added that
the two conditions demanded by the Communists would have the
effect of destroying the Chinese Republic. The Government there-
fore felt that it had no alternative but to proceed with its own pro-
gram for political democratization. It appealed to all groups and
factions to join in the work of the reconstruction and rehabilitation
of China. The Generalissimo, on February 16, 1947, followed up this
plea with one of his own, pledging his Government to a 10-point pro-
gram of economic rehabilitation and asking for the cooperation of all
citizens of China. 1 On February 11, the Government notified the
Communist delegation in Nanking that its presence in Government
areas was no longer desired.

REVERSAL OF COMMUNIST POLICY

Indications of the attitude of the Chinese Communist Party were
given in statements which appeared early in 1947. The first was a
statement by Chou En-lai 2 which, together with the other documents,
represented a major change in the public official Communist line
and a distinct reversal of policy as previously set down in 1945 by
Mao Tse-tung, as Chairman of the Central Committee, in his report
to the Seventh Party Congress entitled The New Democracy. The
second document was a statement by Lai Ting-yi, head of the Depart-
ment of Information of the Chinese Communist Party and a member
of the Central Committee, in which he aligned the Chinese Communists
with Russia on foreign policy and denounced the United States as the
heir of German and Japanese Fascists. 3 On February 1, the Central
Committee issued a strong denunciation of the National Government,
accused the Government of selling out China to foreign interests and
announced that the Chinese Communists would refuse to recognize
any agreements and understandings reached by the National Govern-
ment subsequent to January 10, 1946. 4

1 For full text of these statements see annex 116 (a) -(d).

2 See annex 117.

3 See annex 118.

4 Full text in annex 119. The length to which this change has gone is indicated
in a speech by Mao Tse-tung given on June 30, 1949, which is included as annex
120 .

AMBASSADORSHIP OF JOHN LEIGHTON STUART

233

THE SOVIET PROPOSAL OF MARCH 10, 1947

On March 10, at a meeting of the Council of Foreign Ministers
at Moscow, the Soviet Foreign Minister, Mr. Molotov, proposed that
problems relating to the settlement of the civil war in China be in-
cluded in the agenda of the meeting of the Council. The United
States Government did not concur in the Soviet proposal. This view
was reinforced by the instantaneous reaction of the Chinese Govern-
ment. The Chinese Foreign Minister, Dr. Wang Shih-chieh, on March
11 informed General Marshall that China would strenuously object to
having its internal affairs placed on the agenda of the Moscow Con-
ference. At the same time the Foreign Minister issued a similar
statement to the press. The Chinese Communists took their cue from
Moscow and issued a statement favoring inclusion of China on the
Moscow Conference agenda, but insisted that the Chinese Communists
themselves should be represented at any such discussions. In view of
the opposition to the Soviet proposal, it was dropped.

Dr. Wang also informed the American Ambassador that on March 8
the Soviet Ambassador had called with two requests: (1) that
China take over the administration of Dairen and Port Arthur and
(2) that joint operation be undertaken of the railway line from Dairen
through Mukden to Changchun. Subsequently a Chinese Govern-
ment Mission under strict Russian surveillance did visit Dairen to
survey the situation. The negotiations reached an impasse over the
questions of armed police and the admission of Chinese troops into
the area and were not renewed.

REORGANIZATION OF THE LEGISLATIVE YUAN AND THE CONTROL
YUAN, MARCH 1, 1947

In the meantime, the functioning of the National Government had
been paralyzed to a considerable extent by the slowness with which
its projected reorganization was proceeding. The new Constitution
of China had been adopted by the National Assembly on December 25,
1946, with the provision that it would go into effect one year from the
date of its adoption. During the interim period a transition govern-
ment would be organized to prepare the country for constitutional
government, to eliminate one-party rule by termination of the period
of political tutelage, and to prepare other groups for participation
in the national political life. The organization of this new govern-
ment proved to be far more difficult than had been anticipated.

The difficulties principally arose from the inability of the Kuomin-
tang and the third parties to agree in their negotiations upon the
division of the principal positions in the Five Yuan and the State
Council. It should be noted, parenthetically, that throughout these

234

TJ. S. RELATIONS WITH CHINA

negotiations a certain number of positions were reserved for the
Communist Party if it should choose to participate. There was at no
time, however, any indication that the Communists had any intention
of participating and, in fact, all their public announcements were
emphatic in stating that it would be impossible for them to participate
under what they called “an illegal constitution.”

At a fairly early stage in the negotiations it also became apparent
that the Democratic League, the third largest party, had so far asso-
ciated itself with the stand taken by the Communists that it too would
not participate. This reduced the negotiations, apart from the in-
ternal manipulations within the Kuomintang itself, which became the
most important phase, to a division of positions between the Kuomin-
tang on the one hand and the Youth Party and the Social Democrats
on the other. These two minor parties commanded so small a follow-
ing that the efforts to get them in the Government could be considered
important only in a symbolic sense of nominally ending one-party
rule.

At midnight, March 1, the Government announced the appoint-
ment of 50 new members to the Legislative Yuan, of whom 17 were
Kuomintang, 13 Youth Party, 12 Social Democrats, and 8 non-parti-
san. At the same time 25 new members were named to the Control
Yuan, of whom 9 were Kuomintang, 6 Youth Party, 7 Social Demo-
crats, and 3 non-partisan. Forty-four new members were added to
the People’s Political Council, of whom 11 were Kuomintang, 11
Youth Party, 11 Social Democrats, and 11 non-partisan. These new
members added to the old membership gave the third parties a
minority representation, but nonetheless one much larger proportion-
ately than their actual political following.

The next day Dr. T. V. Soong, following a frank conversation with
the Generalissimo, resigned as Prime Minister. Ambassador Stuart
interpreted this development and its background to the Department
of State in the following terms on March 3 :

“T. V. Soong had a long talk with Generalissimo on the afternoon
of the evening that he handed in his resignation. At any rate the
latter interview was not unamicable and the Generalissimo, although
urging him to maintain his position as chairman of the Supreme
Economic Council, readily accepted his resignation as President of
the Executive Yuan and then without much ado as the chairman
of the Supreme Economic Council as well. My surmise from avail-
able information is that Generalissimo propounded to T. V. Soong
in the first conversation his military plans for intensification of the
civil war which intev alio, will require, in view of recent price increases,
a rise in pay and supply allotments for the Army in the near future.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

235

Hemmed in on the one side by relentless demands of civil war and
on the other by increasingly painful limitations which his growing
unpopularity was imposing on his freedom of action, he decided to
save his reputation — if not his face — by chucking in his hand before
it was called and he was well smeared.

“My belief is that the Generalissimo has determined to embark on
an all-out military campaign to free as much of China proper from
Communist control as possible to the end that after about three months,
the Communists would be chastened (where they are now blatantly
bumptious) and concentrated in a much smaller area. My guess is
that feeling as he does about Communists, the Generalissimo, although
nervous about the Mqscow Conference, does not envisage any improve-
ment promising permanency in Soviet-American relations and there-
fore is not without hope that the United States will in due course
come in some fashion and to some degree to the Government’s assist-
ance. There is no doubt that he is now increasingly concerned about
the rate of financial deterioration and the ability of Communists to
prolong the struggle and create havoc. However, he has made a point
of telling Chinese who call upon him that China must stand on its
own feet and face the future without American assistance. I have a
sense that the CC Clique 6 work on him in this wise and, concomi-
tantly, to the effect that he will be getting the worst of both worlds
if he weakens himself domestically and fails to achieve compensatory
aid from the United States. That his mood is exigent and bitter
is evident as indicated in today’s speech. As I see it, these next few
days are important for the reorganization plans — important in that
this fight-it-all-alone mood should not find reflection in the appoint-
ments and powers of the State Council and the Executive Yuan.”

AMBASSADOR STUART’S SUMMARY OF DEVELOPMENTS

On March 12, Ambassador Stuart summarized the developments
of late February and early March, together with his interpretation as
given below, this being of particular importance in view of the im-
pending Third Plenary Session of the Central Executive Committee
of the Kuomintang which would have an important bearing on future
developments :

“Events have moved so rapidly in China during the past 10 days
and have included so many complicating factors that it might be use-
ful at this time to present a brief over-all summary drawing together

“The CC Clique is the extreme right-wing faction of the Kuomintang and is
completely dominated by two brothers, Chen Li-fu and Chen Kuo-fu, who have
long been closely associated with the Generalissimo. The latter has relied on
them to discipline the rank and file of the Party.

236

U. S. RELATIONS WITH CHINA

and correlating previous telegrams. The two main aspects are, of
course, the military and the political-economic, with the former giv-
ing a kind of desperate urgency to the need for political adjustment
because the continuance of civil war is an increasing drain on the
national economy, making a mockery of attempts to move in the
direction of normal economic development.

“The current military campaigns have surpassed in scope anything
seen in many months. The Government obviously wanted, and badly
needed, a major military victory in Shantung. This it has failed to
obtain. Communists took the initiative in Manchuria, managing to
force their way to the very gates of Changchun. They have now been
turned back by Nationalist reinforcements and in this sense have suf-
fered a defeat if, as has been suggested, their objective was a territorial
victory to strengthen the hand that they hope the Soviets will play
for them at the Moscow meeting. If, on the other hand, the prin-
cipal objective was further to sap Nationalist strength, then they have
achieved a victory. The Military Attache’s intelligent guess on casual-
ties is 10,000 for the Government and 20,000 for the Communists in
Manchuria, and 40,000 for the Government and 20,000 for the Com-
munists in other areas, mainly Shantung.

a The establishment of general headquarters at Hsuchow seems to be
a desirable and long-needed development from the Government stand-
point in that it puts it in a better position to direct and control opera-
tions. The Military Attache also states he sees signs on both sides
of a decreasing desire to fight and more particularly by Government
forces. Even high-ranking officers have said to him that whereas
there seemed to be some point in endless fighting when the enemy was
Japan, there is not much stomach for fighting when it is against
Chinese. This lack of morale appears to be reflected among the troops
who do not understand what the civil war is all about and who, in
some instances, have been susceptible to Communist appeals to lay
down their arms. The Generalissimo’s insistence on increased pay
to improve troop morale played a part in Soong’s resignation.

“Against this grim background have been the political changes of
the last 10 days, which, so far, are inconclusive. The reorganization
of the State Council and the Executive Yuan is still in the negotiation
stage. The stumbling block is whether and on what terms the Social
Democrats will participate ....

“In the excitement of other events, the announcement by the Gov-
ernment of additional government, third party and non-partisan
members to the Legislative and Control Yuan, the PPC, and the
Standing Committee for the Enforcement of the Constitution caused
only a minor ripple. The Government stand that this development

AMBASSADORSHIP OF JOHN LEIGHTON STUART

237

constitutes a significant step in the direction of relinquishing one-
party control has received little attention and is not likely to do so
pending reorganization of the State Council and the Executive Yuan.

“The heightened tempo of repressive police activities all over the
country, and particularly in areas where the Communists have been
most active has been widely reported and variously interpreted, de-
pending on the political views of the commentator. This development
has been strongly condemned in independent and left-wing circles.
At the same time the attitude has been general that however repre-
hensible these activities may be, the Government can hardly be ex-
pected to loosen its controls as long as it is engaged in a life and death
struggle. Concomitantly, there is general belief that with the re-
turn of all Communist delegations to their own territory the possi-
bility of peace negotiations and political settlement has been indefi-
nitely postponed, making all the more improbable any prospect of
halting economic deterioration.”

THE CAPTURE OF YENAN

The Generalissimo in his statement of February 16, indicating the
intention of the Government to consolidate its current positions, had
said : “On its part the Government will confine its military efforts to
the protection and restoration of communication systems so necessary
for the economic life of the nation and we shall spare no efforts to
continue to seek for a political solution of the Communist problem.”
At that time Dr. T. V. Soong had categorically stated to the Ameri-
can Ambassador that both he and the Generalissimo were of the same
mind, that Yenan should not be attacked. Subsequently the Military
Attache was similarly advised by the G-2 section of the Ministry of
National Defense. It was therefore not without significance that the
Government chose the middle of March to launch an attack on Yenan
and capture the already largely evacuated Communist capital. The
military claims of the Government subsequently proved to be ex-
aggerated, but the psychological effect in non-Communist China at a
critical point was important. From a strictly long-range military
standpoint, the capture of Yenan served principally to over-extend
Government lines and drain the national economy. The Ambassador
commented as follows on this subject :

“Although the Government claims it routed over 100,000 Com-
munist troops, this appears to be a gross exaggeration since Ameri-
can observers during the return of Communist mediation personnel
reported the virtual evacuation of Yenan. It has long been apparent
that the Communists have prepared well for this eventuality and
that they never had any real intention of defending Yenan should such

238

U. S. RELATIONS WITH CHINA

action appear to be costly. Rather it is more in keeping with their
long developed tactics to evacuate any given point in the face of enemy
pressure, draw him into a pocket, and thereafter gradually sap his
strength with guerrilla tactics. Furthermore, Government lines are
seriously extended into territory which can be counted upon to be
hostile in all respects.”

Indicative of Government confidence in a settlement by force was
the public claim by the Chief of Staff at this time that the Com-
munists would be defeated in six months. Coincidentally, the Gen-
eralissimo told Dr. Stuart that by the end of August or the beginning
of September the Communist forces would either be annihilated or
driven into the far hinterland.

STUDENT DEMONSTRATIONS

It was symptomatic of the growing popular discontent that May
and J une should witness the most serious outburst of student demon-
stration and violence since the end of the war against Japan. In
every major academic center of China students, for the most part
with much sympathy from University faculties, went on strike, de-
manding an end of the civil war, effective action by the Government
to improve national economic conditions and relief for their own in-
creasingly desperate economic plight. Numerous deaths resulted from
these demonstrations and it was only because of skillful handling of
the situation in such key areas as Peiping and Shanghai by certain
key individuals and the opportune ending of the school year, which
permitted the Government to close the universities for the summer,
that more serious disturbances were avoided. The Government was
no doubt concerned over the implications of these disorders as indi-
cative of mounting popular discontent. The situation was further
complicated by a series of relatively minor but potentially dangerous
rice riots coming at a time when the new crop had not yet been har-
vested and the stocks of the previous year were rapidly being ex-
hausted. 6

The Ambassador reported as follows on May 29 :

“Over-all political scene which continues to be dominated largely
by the economic and military situation, is deteriorating at an accel-
erated rate. Within recent weeks existing bad rice situation, brought
about in the main by military requirements and hoarding, has added
to the spreading unrest. On May 18 the Government issued an edict
prohibiting student demonstrations which was immediately disobeyed
in major urban centers and has resulted in further loss of prestige by

a See annexes 121 and 122 for Embassy reports of May 20 and June 4, 1947.

AMBASSADORSHIP OP JOHN LEIGHTON STUART

239

the Government. At the present time the students are actively
agitating for a nation-wide general strike to commence June 2, but the
student movement has thus far been characterized by considerable in-
decision and has not fallen under the control of any single group or
party. There are strong indications, however, that the student move-
ment will assume larger proportions and eventually come under the
leadership of anti-Government groups, particularly of the Democratic
League if not the Communists. . . .

“As general unrest and disillusionment increases, Communist pres-
tige is enhanced, largely through recent military successes in north
China and Manchuria. Although completely reliable information is
not yet available, it is reasonably clear that in Manchuria the Central
Government has suffered reverses along the Chinese Changchun Rail-
way and at least a partial Government withdrawal in the Northeast
may become necessary. Recent Communist military activities in Man-
churia have been well coordinated with large-scale raids on north
China and Jehol rail lines assisted in a large degree by the military
blunderings of General Tu Li-ming. An important aspect of the
north China situation is the evident Communist capability of dis-
rupting communications between the Kailan mines and the sea which
will have continual effect upon the coal supply situation, especially
for Shanghai.

“Although anti-civil war sentiment is increasing, largely among stu-
dent, academic and business groups, it has thus far not reached a point
where it will be decisive in influencing the Government as evidenced
by the character of the two statements issued by the Generalissimo this
week. The fact that he felt called upon to issue any statement speaks
for itself. One indication that there is growing sentiment among
liberal Kuomintang members of the Government for peace negoti-
ations was a resolution presented to the Legislative Yuan recently by
some twenty of its members, calling for the resumption of peace talks
and reportedly having the tacit approval of Dr. Sun Fo. On May 27,
the PPC adopted a resolution to invite the Communists to resume
peace talks which can be interpreted as largely a Kuomintang ma-
neuver stemming from recent military reverses and growing anti-
civil war sentiment, and designated to pin sole responsibility for con-
tinuation of the civil war on the Communists. In the face of Com-
munist military successes, it seems unlikely that the Communists
would be prepared to join in peace talks except on terms much more
favorable than the Government is apparently now willing to accept.

“Nor is there any basis for believing that the Communists do not
regard time and tide as working for them or that they would be
willing at this time to accept equitable and feasible proposals.

240

U. S. RELATIONS WITH CHINA

“For the immediate future the gravest danger to the Government
would result in this atmosphere if disaffection commences among
National troops with the Government unable to supply adequate
rations. There has been fairly steady deterioration of morale in the
Government forces, especially in the Northeast, but for the time being
it is believed that the Government can hold the loyalty of the best
trained and equipped troops. It may be anticipated that Government
efforts will be bent towards supplying these troops adequately and in
expectation that civilian unrest can be held in check or quelled by a
show of force.”

CONTINUED DETERIORATION OF THE GOVERNMENT’S POSITION

The Ambassador further reported on June 7 as follows :

“It is obvious that the Government faces in Manchuria the proba-
bility of a military debacle of large proportions. It has already
withdrawn from substantial areas previously under Government con-
trol. J udging from the ineptitude and incompetence thus far demon-
strated by General Tu Li-ming, it is probable that the Government’s
defeat may assume even larger proportions. It seems to lie within
the Communists’ power either to continue to bleed the Government’s
strength in Manchuria or to force further Government withdrawal.”

It was also symptomatic of popular uneasiness and confusion that
the People’s Political Council, which had played such a significant role
during the war against Japan as a sounding-board of public opinion,
should on May 26, in its last session before it passed out of existence,
pass by a large majority a resolution inviting Communist representa-
tives to come to Nanking for discussions on ways and means of bring-
ing about the termination of the civil war. The Embassy pointed out
that this resolution represented the growing discontent of Chinese
intellectuals with the Government and the mounting demand for some
kind of a peace settlement. 7 The People’s Political Council at the
same session, however, passed a resolution demanding continuation of
the punitive action against the Chinese Communists.

The invitation of the People’s Political Council was promptly and
summarily rejected by the Communists as another evidence of Gov-
ernment insincerity. The Ambassador on June 18 reflected popular
speculation on further developments in the following report:

“President Chiang believes that he had conclusive evidence of a
Communist plot to create widespread disorders on June 2 and is no
less convinced that the measures taken thwarted this. He unquestion-
ably over-estimated the Communist influence in the recent student

7 See annex 123.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

241

demonstrations and probably realizes this now himself. There were
divergencies in what occurred in the principal cities. The tragic
death of three students in Wuhan University and the serious wound-
ing of three others, together with a number of minor casualties were
on the initiative of the Hankow garrison commander, who has been
summarily dismissed.

“The PPC peace resolutions have been presented through the Stand-
ing Committee of that body to the State Council, which approved
them in principle but has asked that they be made more concrete for
final action at the next meeting of the State Council. . . .

“In contrast with almost all the other high officials President Chiang
is maintaining his calm self-control and a somewhat sobered confi-
dence. There is a general feeling of frustration among the others due
primarily to the objective facts with which they are all familiar but
intensified by the nervous fear of the Communists. . . .

“It requires a certain temerity to attempt any forecasts, but it would
seem that one of three possible consequences will follow without much
delay from the present critical conditions:

“1. President Chiang will assert himself as the leader of an attempt
to settle the Communist issue either by securing their assent to renew
negotiations or by demonstrating that they are in effect an armed
rebellion and as such opposed to the national welfare. I have been
hoping that he would be able to do this in a dramatic, revolutionary
way that would catch the imagination of his people. This is probably
expecting too much, but he has gone so far in discarding his earlier
preconceptions and adopting progressive ideas that I believe he can be
influenced to further advance. This will perhaps be slower and much
less satisfactory than a more spectacular procedure but it has real
possibilities and is perhaps by all odds the most hopeful solution.

“2. With the threatening catastrophe drawing closer it is quite
possible that a nucleus of enlightened, non-partisan leaders may
emerge who will attract the more liberal elements from within the
Kuomintang, be supported by the politically conscious public and
come to terms with the Communists. President Chiang would pre-
sumably disappear from the scene, Premier Chang Chun, T. Y. Soong,
or some other outstanding figure might assume leadership, and an ad
interim coalition government be established. Among the disadvan-
tages would be the inexperience of the new group and the inability,
especially conspicuous among Chinese, of a loosely-formed body to
cooperate effectively.

“3. There will be complete disintegration of the present Central
Government with the Communists in control of their own territory,
which they would use every effort to extend. Sectional governments

242

U. S. RELATIONS WITH CHINA

would be established under the strongest man or group in the area
with all the evils of such chaotic and unstable conditions.”

Evidence of growing deterioration in the general situation and of
increasing popular dissatisfaction with the Government and its con-
duct of the civil war was being received not only from the better-
known urban centers such as Shanghai, Nanking and Peiping, but
was also disturbingly obvious throughout all sections of the country.
Perhaps the most disturbing report received by the Embassy came
the last week in June from the American Consul General in Mukden.
He reported the gradual worsening of the Government’s military
position, personal sqtiabbling between military commanders, growing
Communist initiative which kept Government forces disorganized
and off-balance, the tightening of the economic situation and the slack-
ening popular morale, which made the local populace increasingly
receptive to almost any change which might offer some prospect of
stabilization. It was a picture of Government corruption, inefficiency
and aimlessness in the face of a major disaster. 8

The downward course of the economic and financial situation in
China during 1947 is described in more detail in chapter VIII, where
the question of further extension of aid by the United States is
also discussed. It was impossible for the United States Government
to consider that question apart from the problem of reforms in the
Chinese Government, since without such reforms no financial aid could
provide a remedy.

II. AMERICAN EFFORTS TO ENCOURAGE
REFORMS BY THE CHINESE GOVERNMENT

During the war against Japan the United States endeavored to
encourage the Chinese Government to effect various reforms which
would serve to strengthen the Government and thus contribute to
the fight against a common enemy as well as lay the foundation for
stability and progress in the post-war period. At the request of the
Chinese Government, the United States Government sent American
advisers and technical experts to China to assist the Chinese Govern-
ment in various fields, such as soil conservation, public health, coop-
eratives, animal husbandry, industrial production and medicine.

AMBASSADOR STUART’S REPORTS

During the period of General Marshall’s mission to China, both he
and Ambassador Stuart repeatedly emphasized to the Chinese Gov-
ernment leaders the desirability and also the necessity of formulating

* See annex 124.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

243

and carrying out measures of reform which would improve govern-
mental administration and efficiency, win for it popular support and
confidence and contribute to the effective use of American aid.

Following General Marshall’s departure from China and in con-
tinuation of his efforts, Ambassador Stuart took every opportunity,
in conversations with Government leaders, to stress the need for action
by the Government which would result in the emergence of liberal
elements to positions of leadership, the lessening of the influence of
the reactionary group and the carrying out of basic measures of reform.
It was felt that only through such action could the Government suc-
cessfully meet the challenge of the Chinese Communists and be able
to prevent dissipation of its own resources and to make effective use
of American aid.

In the light of these considerations, great importance was attached
to the outcome of the efforts and plans being made for reorganization
of the Government. The Third Plenary Session of the Central
Executive Committee of the Kuomintang met during March and its
meetings gave some indication of the struggle for power between
conservative and liberal factions of the Party. The two principal
points of interest were (1) the efforts of certain factions within the
Kuomintang to obstruct reorganization of the Government and (2)
the struggle for power and position between the reactionary CC
Clique and the loosely knit Political Science Group. On the first
point, the Generalissimo, supported by the liberal elements, was
successful in blocking the drive to stop reorganization. In the
struggle between factions, the Generalissimo emerged in a stronger
position than before, but at the same time the CC Clique continued
in control at all levels of the Party machinery.

This intra-Party struggle for personal power occurred against the
background of the deterioration of the Government’s prestige and
position and apparently without regard for its effect on the Govern-
ment and unity of purpose. The Ambassador commented on March 12 :

“Evidence of CC Clique expansion into the financial field will not
increase banking and business confidence in the Government — it is
also additional evidence of the Generalissimo’s tactics of not allowing
any one group to gain exclusive control over the finance of the
country.’’

The Ambassador pointed out on April 5 some of the difficulties
connected with the efforts for governmental reorganization and the
Generalissimo’s part therein :

“The tragic paradox of his position, of which he may be unaware,
is that he is being compelled by circumstances to utilize the quali-

244

U. S. RELATIONS WITH CHINA

fications which the CC Clique can offer. At the same time this Clique
exploits its preferred position to render more firm its hold on the
Party and the country; and with time the Generalissimo, therefore,
may well become less and less able to dispense with them or to cir-
cumscribe their activities which can only serve to aggravate those
social conditions basically giving rise and strength to the Communist
movement.” 11

The Ambassador also commented :

“The Foreign Minister remarked the other day on the irony of a
situation where the Generalissimo, having been made self-conscious
about his ability to dictate a political settlement and consequently
reluctant to use bludgeoning tactics, finds himself in endless political
dickering which only delays that reorganization which his liberal ad-
visors have been urging on him.”

The Ambassador also reported that the CC Clique was attempting
to build itself up in the popular mind as the truly liberal and revolu-
tionary element of the Party; that the CC Clique was putting its
main effort into preparation for the elections which would precede
the coming into effect of the constitution on December 25, 1947 ; and
that preparations were proceeding for the termination of political
tutelage.

The Central Executive Committee of the Kuomintang issued a
manifesto on March 24 prior to the conclusion of its session. This
manifesto did little to clarify the situation beyond general state-
ments on broadening the basis of the Government, removing obstacles
to national unification, stabilizing the national economy, striving for
world peace and building up the potential strength of the country
for national reconstruction. 1 *

REORGANIZATION OF THE EXECUTIVE YUAN AND STATE COUNCIL,
APRIL 17, 1947

On April 17 the reorganization of the Executive Yuan and the
State Council was announced, with General Chang Chun as Presi-
dent of the Executive Yuan or Prime Minister. At the same time,
Dr. Sun Fo, son of the founder of the Chinese Republic, was elected
Vice President. Nominations by the Generalissimo for the other
four Yuan showed no change. A series of official statements accom-
panied this completion of the reorganization. President Chiang, in
a statement on April 18, hailed the reorganization as another step
in the ending of political tutelage and again offered the Communists

11 See annex 125.

13 See annex 126.

AMBASSADORSHIP OF JOHN LEIGHTON STUART 245

an opportunity to participate in the Government if they would
abandon their policy of seizing power by force. At the same time the
political program of the National Government was announced, which
largely followed the earlier outline of the manifesto of the Central
Executive Committee of the Kuomintang, with the addition of guar-
antees for civil liberties. On April 23 the Minister of Information
in his weekly press conference made a similar announcement on be-
half of his Government that the Kuomintang had ended the period
of political tutelage. The same evening the new Prime Minister,
General Chang Chun, pledged himself and his Government to the
fulfillment of the obligations which the Government had undertaken
publicly during the preceding days. 1 *

In commenting on the reorganization of the Government, the Am-
bassador stated that it was too early to assess with any accuracy the
eventual effect of the State Council reorganization and that any such
assessment must be approached with caution in the light of a series of
past Chinese Government reorganizations which had been largely
for external effect and had brought little effective change to the
Chinese domestic scene, even though the majority of Kuomintang
members were forward-looking modern Chinese. The Ambassador
further stated :

“In summary, the composition of the State Council is as regards
the Kuomintang and independents as good as could be expected in
the circumstances. Whether or not the State Council, which will con-
stitute itself on April 23, if its members can reach Nanking by that
date, will assert itself in such a manner as to bring about substantial
social and economic reform in China remains, of course, a question
depending upon many factors, not the least one being the attitude of
the Generalissimo toward it and his ability to control the Kuomin-
tang as the still dominant political party in China.”

The Ambassador noted with some concern the establishment at
this time of a separate Kuomintang political committee, the secre-
tary general of which was Chen Li-fu, the leader of the CC Clique,
and pointed out that it was a safe assumption that this committee
would have an important role in controlling the Kuomintang po-
litical machine and establishing party policies. He concluded:

“In final analysis the major imponderable is whether or not the
Generalissimo will be capable of seeking and being guided by the
advice of liberal-progressive public servants rather than acceding to
the reactionary henchmen personally loyal to him.” 14

18 See annex 127 (a) -(d) for full text of statements.

14 See annex 128.

246

U. S. RELATIONS WITH CHINA

While the governmental reorganization was a step in the right
direction and gave some hope for improvement, the behind-the-scenes
political maneuvering for power without regard for the position of
the Government itself continued to hamper efforts toward improve-
ment in administration. This disunity and the political machinations,
despite the serious situation with which the Government was con-
fronted, were reflected in the circumstances surrounding the student
demonstrations which occurred on a nation-wide scale in May. The
Ambassador’s comment on these demonstrations evidenced their
character :

“Leadership and motivation of the demonstrations have shown defi-
nite signs of changing. Most competent observers believe the original
impetus was given by the CC Clique which was desirous of inciting a
series of disorders which would in time publicly discredit a Political
Science Group-dominated Government by proving it incapable of
maintaining order, and in the long run provide the justification for
a strong-arm, right-wing government coming into power either
through a coup d’etat or through sweeping the elections to be held this
fall.”

These activities, of course, played into the hands of anti-Govern-
ment elements and as stated by the Ambassador : “It must be assumed
that the Communists are present and, if not already active, are pre-
pared to exploit the situation should it become necessary or desirable.”

On May 29 the Embassy reported on developments to the Depart-
ment as follows :

“The reorganized Executive Yuan under Chang Chun is more
strongly based than the previous T. V. Soong regime, but the political
maneuvers of the CC Clique and the pace of economic and military
developments have tied its hands to date. Furthermore, in the face of
existing problems, non-Kuomintang participants in the reorganized
Government have thus far shown no capacity for initiative. However,
outlook for next few months is not, in the Embassy’s opinion, for any
spectacular collapse but in the direction of increasing deterioration
in Government authority and control. In the meantime, general Gov-
ernment sentiment will continue to look to American aid as a means
of staving off further economic and military deterioration.”

Further indication of the need for positive measures by the Chinese
Government to restore popular confidence was contained in the Am-
bassador’s comments on the situation on June 18 :

“The growing discontent with or even hostility toward the Govern-
ment has been stimulated among intellectuals by the extremely harsh
measures against students and among the unthinking masses by the

AMBASSADORSHIP OF JOHN LEIGHTON STUART 247

mounting costs of livelihood. In its simplest terms the complaints
center around freedom and food.”

The Ambassador further commented :

“President Chiang has been thinking very earnestly both over the
situation as he is compelled to recognize its realities and over advice
given him which, so far as I can gather, has all been very much to the
same effect. In general, this is that the demand for peace is wide-
spread and insistent, and the Government should be able either to per-
suade the Communists to stop fighting and resume peace discussions or
to place the responsibility for continuing the civil war upon them,
and furthermore that the Government should win back popular con-
fidence by official statements calculated to keep the people much better
informed than they have been hitherto of the problems and intentions
of the Government. In my personal conversations with President
Chiang I have been as frank as seemed permissible and have been
cheered especially during the latest interview by what seemed to be on
his part something more than a general assent in principle.”

The Ambassador also observed :

“Actually much of the apparent strength of Chinese Communism
is due chiefly to the inefficiency and corruption of the Kuomintang
and — w ith an alarming acceleration — to popular loss of faith in the
Government. One can be reasonably certain that with sufficient evi-
dence of competent statesmanship and determined moral reforms the
Government could recover its hold alike on the intellectuals and the
masses.”

THE POLITICAL SITUATION IN MANCHURIA

The same struggle for power and the intra-party rivalry which
was hampering the National Government was vitally affecting the
Government’s position in Manchuria. During the latter half of June
the Consul General at Mukden reported as follows :

“Rivalry (if not enmity) between General Hsiung Shih-hui, the
Generalissimo’s representative, and General Tu Li-ming, Command-
ing the Northeast Combat Command, is openly discussed and the
absence of closely integrated military and economic planning is at-
tributed to it.”

The Consul General also described the attitude of Chinese Govern-
ment representatives in Manchuria and the effect upon the Govern-
ment as follows :

“Nationalist southern military forces and civil administrators con-
duct themselves in Manchuria as conquerors, not as fellow country-

248

U. S. RELATIONS WITH CHINA

men, and have imposed a ‘carpet-bag’ regime of unbridled exploita-
tion on the areas under their control. 55

He continued that the result was to make the local populace in the
countryside so antagonistic toward outsiders as to affect the morale
of non-Manchurian troops and at the same time arouse vindictiveness
in southern military officers and civil administrators. Commenting
on the food problem at Mukden the Consul General said :

“Puerile efforts have been made toward price control and to com-
bat hoarding, but in general, the results of these efforts have been
largely to enforce requisitioning of grain at bayonet point for con-
trolled prices and enable the resale of requisitioned grain at black
market prices for the benefit of the pockets of rapacious military and
civil officials. 55

It was thus inevitable that, as reported by the Consul General:

“Evidence is growing daily that the people of Manchuria are not
only prepared for but are keenly desirous of a change in government.
But what change? Most are undecided even though voluble in dis-
content of the present way of living and the trend of events. It is safe
to state that the overwhelming majority in the nation are dissatisfied
with, dislike and would welcome freedom from the present National-
ist regime. 5 ’

When on June 19 the Generalissimo summoned the Ambassador
and, after describing to him his estimate of the seriousness of the
situation in Manchuria, asked for the Ambassador’s opinion, Dr.
Stuart made the following reply :

“I replied that it might be that the time had come for him to take
emergency measures such as organizing a small but carefully selected
group to work with himself, men respected by all and able to take
responsibility as well as to form a team ; to reduce expenditures by -at
least discontinuing all measures not needed for the emergency period ;
to make an announcement to the people that if the Communist Party
finally refused the latest peace proposals the people of the country
should hold them responsible; if they wished to preserve the demo-
cratic way of life as to be effected soon under constitutional govern-
ment they should all work together to save the nation from the threat-
ened danger ; to this end all should work for the common purpose and
contribute what they could of service or wealth; the Government
should, respecting civil liberties, carry out the most immediate reforms
with the courage and ruthless impartiality required by the crisis and

AMBASSADORSHIP OF JOHN LEIGHTON STUART

249

in all such ways win back popular support or ask to be relieved of the
task ; that I had always believed that such a revolutionary program
would attract the thinking people, especially students and other sup-
posed leftists; that he should allocate responsibility (for instance,
military affairs) with a minimum of red tape, and himself tour the
country making speeches and arousing the populace to rally to the
new movement ; that with the people behind him he need not fear the
Communist military strength nor their other activities and should con-
tinue to keep the door wide open for a resumption of peace negotia-
tions; that hopelessness and defeatism were paralyzing those who
wanted to do something for the nation but under some such deter-
mined, progressive leadership they could be inspired to new hope and
effort ; and finally that I felt sure such a program would win abundant
sympathy in America and elsewhere over the world. At the end, he
said that he had been thinking along very much the same lines.”

CHINESE MOVES TOWARD REFORM

In the face of a situation calling for the most resolute and clear-
sighted action, the powerful Standing Committee of the Central Ex-
ecutive Committee of the Kuomintang on June 30 held an extraordi-
nary and previously unannounced session to discuss general Party
policy. After five hours of discussion, the Committee adopted three
resolutions: (1) to continue and expand the “punitive action against
the Communists”; (2) to draw up and put into effect plans for inte-
grating the San Min Chu I Youth Corps into the Kuomintang; and
(3) to set in motion preparations for the fall elections. Such inade-
quate measures at this critical time would have been farcical had they
not been so tragic in their implications of a lack of driving force and
determination to see the civil war through to a successful conclusion.

There was, however, apparently an awareness of the need for drastic
action on the part of the National Government, as indicated by the
resolution on general national mobilization passed by the State Coun-
cil on July 4, which stated, inter alia:

“It is proposed that the State Council order a national general
mobilization and encourage the people to help in its execution. Plans
concerning the acceleration of economic reconstruction, the reform
of local governments, the mobilization of manpower and resources,
the improvement of food and conscription administrations, the main-
tenance of social order, the mitigation of the people’s sufferings, the
protection of their basic rights, the practice of thrift, the increases
of agricultural and industrial production, and the amelioration of

U. S. RELATIONS WITH CHINA

250

the treatment of officers and men shall be carefully drafted by the
competent authorities and enforced in accordance with law. The
competent authorities shall also be instructed to guard against abuses
in the execution of those plans.” 15

This awareness was also reflected in statements made at this time by
the Generalissimo and General Chang Chun, the Prime Minister. In
an address to the nation on July 6 the Generalissimo said :

“Simultaneously, we must exert all-out efforts in effecting national
reforms and improvements. While we are suppressing the Communist
brigands with military means, the nation must also at the same time
effect internal reforms.”

The President admitted

“that the Government in itself is not perfect while in the body of the
Chinese society also are found many weak points, made all the weaker
by the Communist rebellion. But, however difficult it may be for
the nation to accomplish its goal, reforms and improvements must be
effected.”

The official Central News Agency gave the following account of
General Chang Chun’s statements on this same subject in a press
interview on July 5 : “During the period of national general mobiliza-
tion, the Government will see that all orders are faithfully and
promptly carried out,” he said. “Government officials should win the
confidence and cooperation of the people and coordination among
various Government departments should be further strengthened.
Corruption and delinquency among Government officials and armed
forces should be wiped out,” General Chang emphasized. 1511

The Generalissimo again reflected this increasing awareness of cur-
rent needs in his radio broadcast on July 7, the tenth anniversary of
the beginning of Sino- Japanese hostilities :

“Unless drastic reforms are introduced, China may not be able to
exist in the family of nations. Therefore, political, educational, eco-
nomic and social reforms, which should be made, shall not be delayed
until the conclusion of the suppression campaign, but will be initiated
right away. ... It was for the purpose of concentrating our efforts
to effect an over-all reform and remove all obstacles in the way of
national reconstruction that national general mobilization was
ordered.” 16

” See annex 129.

15 * See annex 130.

” See annex 131.

AMBASSADORSHIP OF JOHN LEIGHTON STUART 251

THE COMMUNISTS PROCLAIMED TO BE IN OPEN REBELLION, JULY 4,
1947

The resolution on general national mobilization adopted by the
State Council on July 4 also proclaimed the Chinese Communists to
be in open rebellion against the National Government and demanded
that the resources of the country be devoted to their suppression.
This part of the resolution was reinforced by statements issued
shortly thereafter by the Generalissimo and the Prime Minister, Gen-
eral Chang Chun, in which it was emphasized that the Government
was determined to carry out and make effective the national mobiliza-
tion and suppress the Chinese Communist rebellion. It is interesting
to note that the Generalissimo said, “We have never attempted to
castigate Communism as a theory or idea. . . . The Government was
willing to give full consideration to their opinions, but no peace talk
no mediation — has succeeded in dissuading the Communists from stag-
ing a rebellion.”

Thus ended a long chapter in Kuomintang-Communist relations,
begun in 1937, during which there had been alternate periods of
negotiations and military clashes. The Chinese Government had now
abandoned its previous publicly expressed policy of seeking to solve
the Communist problem by political means and was proclaiming the
Chinese Communists to be rebels against the Government’s authority
who were to be suppressed by military force.

On July 19, the Central News Agency published the text of “The
Outline for the Implementation of Mobilization to Suppress Rebellion
and Complete Constitutional Government,” which was adopted by the
State Council on July 18, to become effective immediately. Its 18
articles were general in scope but provided an adequate framework
if the Government should succeed in implementing them effectively. 17

SECRETARY MARSHALL’S MESSAGE OF JULY 6, 1947

On July 6, Ambassador Stuart had delivered to the Generalissimo
a message from Secretary of State Marshall, as follows :

“We have been following closely the situation in China and are
perturbed over the economic deterioration resulting from the spread
of hostilities. We are keenly aware of China’s needs and the Genera-
lissimo is thoroughly familiar with the general tenor of my ideas. I
cannot presume in my position to offer advice as to how he should
deal with the specific situation in Manchuria. In all frankness I must
point out that he was forewarned of most of the present serious diffi-
culties and advised regarding preventive measures.

17 See annex 132.

252

U. S. RELATIONS WITH CHINA

“In the final analysis the fundamental and lasting solution of China’s
problems must come from the Chinese themselves. The United States
cannot initiate and carry out the solution of those problems and can
only assist as conditions develop which give some beneficial results.
Please assure the Generalissimo of my continued deep personal con-
cern over events in China and of my earnest desire to find ways of
being helpful.”

In transmitting this message to the Generalissimo, Ambassador
Stuart stressed his confidence that the United States wished to assist
and strengthen China as a free nation, but pointed out that it was a
most difficult task to decide upon an effective kind of aid and methods
by which it might be rendered. The Ambassador further said that
military aid alone would not lead toward the type of development in
China which the United States held essential for China’s own good.
The Generalissimo informed Dr. Stuart that he thoroughly understood
the meaning of the message, that he had heard these points from
General Marshall when he was in China and that he was grateful for
this renewed expression.

In reply to the Generalissimo’s inquiry as to the Ambassador’s
interpretation of the message, Dr. Stuart said that he had many times
outlined to the Generalissimo the type of adjustments which were
considered prerequisites to a more positive policy and assistance on
the part of the United States. He said that the type of change which
he had in mind centered around basic reform through constitutional
institutions within the body of the Government, including the dele-
gation of more authority, the establishment and visible maintenance
and protection of civil liberties, and the actual development of a more
intimate working relationship between the Government and the people.
Dr. Stuart stated that the State Council’s general national mobiliza-
tion resolution had in some of its parts certain of the ideas for reform
which his Government thought were so necessary, but that there was
no assurance that this new order would mean more than many which
had previously been issued. The Ambassador again emphasized the
need for drastic over-all reform. The Generalissimo replied that he
understood what was meant and that he would undertake to do some-
thing along these lines as soon as possible.

AMBASSADOR STUART’S OBSERVATIONS ON NORTH CHINA AND
MANCHURIA

Following a brief trip to Peiping, the Ambassador on July 15, at
the request of the Generalissimo, described to him conditions in North

AMBASSADORSHIP OF JOHN LEIGHTON STUART 253

China and Manchuria as he found them. His report of these observa-
tions to the Generalissimo is as follows :

“Independent Chinese and American reports from Manchuria agree
that conditions are extremely serious not merely from a military point
of view but because of the hostility of the people alike toward Commu-
nists and the Central Government. Military officers of the Central
Government of all ranks are exploiting the populace, enriching them-
selves, and consequently there are stirrings of separatist feelings. I
said that it was my strong opinion that reliance on trusted local leaders
with a large measure of autonomy would strengthen the Government
position and neutralize Communist success in using these same methods.

“I said I found the north China people somewhat relieved because
temporary Government gains in Manchuria removed immediate
threat, but discontent was almost as intense as in the northeast. This
discontent seemed generally true throughout the country and was
becoming rapidly intensified.

“The Generalissimo remarked that economic conditions accounted
largely for this, to which I replied that fiscal and economic deteriora-
tion was more a symptom and that it was the general feeling of hope-
lessness and impending disaster that led to increasing military graft,
especially in Manchuria. In short, war weariness and increasing fore-
bodings were paralyzing military efforts. I smilingly charged the
Generalissimo with having used in his latest statement my own lan-
guage about a new revolution but without my emphasis on reform
and constitutional liberties, restricting his own statement in effect
to one of fighting Communists. The Generalissimo agreed somewhat
more heartily than usual with my statements and admitted that others
could see developments sometimes more clearly than he and asked
that I draft specific suggestions. In this latter connection I am taking
no action for the time being.”

On August 11, Ambassador Stuart again repeated his plea to the
Generalissimo that radical reforms be undertaken. 18 On August 19,
in a report on the situation, 19 Dr. Stuart spoke of the growing number,
both within the Government and outside it, who admitted the logic
of the pleas that the Chinese should adopt self-help measures and
put their own house in order, but who felt utterly impotent in view
of the conservatism, feudalistic ideas, selfishness, narrow prejudices
and similar limitations prevalent among those who had the power
to effect reforms. He also said that while the signs of willingness

18 See annex 139.

36 See annex 140.

254

U. S. RELATIONS WITH CHINA

and ability to institute progressive reforms were still sadly lacking
there were some such signs.

Following a brief visit to Peiping, the Ambassador reported to
the Department on September 8 his impressions of conditions in
North China as follows :

“The prevailing attitude of students, is ’. . . quite revealing,

especially when they are thought of as a rough register of the trend
in public opinion. In both Tsing Hua and Yenching Universities
the anti-Communist element is reported as certainly 90% and more
probably 95%, and the anti-Kuomintang-Government proportion as
fully 90%. In the University of Peiping, Government sympathizers
claim that the percentage opposed to the present administration is
much lower. My guess would be that these figures are a fair index
of student thinking generally over the country. The obvious con-
clusion would seem to be that the people — even the more radical and
immature — are instinctively against Communism and could easily
be won to support a truly reformed National Government. Among the
students Chiang Kai-shek, as the symbol of Kuomintang rule, has
lost greatly in esteem. To most of them he is frankly finished.

“Another impression is the extent to which Soviet inspired litera-
ture is being read by students and the unthinking way with which
they accept and quote assertions, about the United States for instance,
which are palpably untrue. If we are to undertake a program of
active assistance to China I earnestly hope that it will be accompanied
by provision for carefully planned publicity.

“Conditions in Communist controlled territory are described to
me as follows. The more intelligent country people live not so much
in actual discontent or hardship as in fear of what might happen to
them at any time. The others accept relative economic insecurity
and the regulations imposed on them rather passively. The children
are growing up with more or less enthusiasm for the existing regime
and are taught to believe all that is evil of the National Government
and America. The situation is still somewhat plastic but will become
fixed with time. There is general agreement that better local admin-
istration with complete assurance that there would be no danger of
the certain reprisals if the Communists came back would result in a
welcome for the National Government. Economic distress is widely
prevalent but there is food for everyone.

“There is great satisfaction in North China over the appointment
of General Chen Cheng to supreme authority in Manchuria and the
dismissal of Hsiung Shih-hui. The purging of army officers and other
reforms, as reported in the local press, have made a fine impression.

AMBASSADORSHIP OF JOHN LEIGHTON STUART 255

“Marshal Li Tsung-jen is gaining in public confidence. There
seems no reason to credit rumors of his disaffection toward the Na-
tional Government. Governor Sung Lien-chung complains — as
usual — of having insufficient troops under his command to cope with
the Communists in Hopei. The Mayor is working diligently to arouse
interest in the coming elections and has drafted college professors and
others to visit the different precincts of the city and give lectures on
the subject. But he is discouraged by the small numbers registering
for casting ballots. It is not clear how much of this apathy is due to
fear and how much to indifference or ignorance.”

III. THE WEDEMEYER MISSION

INTRODUCTION

While the situation continued to deteriorate and popular discontent
with and criticism of the Government increased, the Chinese Govern-
ment seemed incapable of taking, or unwilling to take, effective steps
to meet the serious problems confronting it. There seemed to be
rather a feeling of apathy, defeatism and spiritual bankruptcy which
led inevitably to a complete psychological dependence upon external
aid as the sole means of solving China’s problems with little regard
to the realities of a situation in which Chinese efforts and measures
of self-help were the essential and basic need.

GENERAL WEDEMEYER’S INSTRUCTIONS

In view of these circumstances, the President on July 9, 1947, pur-
suant to the recommendation of the Secretary of State, instructed
Lieutenant General Albert C. Wedemeyer to proceed immediately to
China and Korea on a fact-finding mission. This decision was
announced on July 11.

The President instructed General Wedemeyer to

“proceed to China without delay for the purpose of making an ap-
praisal of the political, economic, psychological and military situa-
tions — current and projected. In the course of your survey you will
maintain liaison with American diplomatic and military officials in the
area. In your discussions with Chinese officials and leaders in posi-
tions of responsibility you will make it clear that you are on a fact-
finding mission and that the United States Government can consider
assistance in a program of rehabilitation only if the Chinese Govern-
ment presents satisfactory evidence of effective measures looking
towards Chinese recovery and provided further that any aid which

256

TJ. S. RELATIONS WITH CHINA

may be made available shall be subject to the supervision of repre-
sentatives of the United States Government.

“In making your appraisal it is desired that you proceed with de-
tachment from any feeling of prior obligation to support or to further
official Chinese programs which do not conform to sound American
policy with regard to China. In presenting the findings of your mis-
sion you should endeavor to state as concisely as possible your estimate
of the character, extent, and probable consequences of assistance which
you may recommend, and the probable consequences in the event that
assistance is not given.”

CHINESE REACTION TO THE APPOINTMENT

The reaction in China was mixed. Dr. Wang Shih-chieh, Minister
for Foreign Affairs, expressed the views of his Government as follows :

“The Chinese Government as well as President Chiang Kai-shek
welcome the appointment of General Albert C. Wedemeyer as special
envoy representing the President of the United States on a fact-finding
mission to China and Korea. He is a staunch old friend of China.
When he served in the China theatre during the latter part of the war,
his contributions to Sino- American collaboration and his achievement
in strengthening the China theatre were widely appreciated.

“It is my belief that his coming visit will vastly facilitate a more
complete understanding of the Chinese situation by the American
people, further strengthen Sino- American friendship and coopera-
tion and be conducive to general stabilization of the situation in the
Far East.”

The Chinese Government believed that General Wedemeyer ’s mis-
sion would result in immediate and substantial economic and military
aid. For the same reason, liberal and opposition groups were skeptical
of the mission, fearing that aid would only prolong the civil war.
Chinese Communist reaction was bitterly hostile.

GENERAL WEDEMEYER’S STATEMENTS OF AUGUST 22 AND 24, 1947

During the month that General Wedemeyer and his mission re-
mained in China they visited the principal centers of the country and
talked with a very large number of people, both in and out of the Gov-
ernment, and representing all shades of opinion and interests, as well
as with American and other non-Chinese businessmen and officials. On
August 22, in accordance with the Generalissimo’s suggestion, General
Wedemeyer delivered an address to a joint meeting of the State
Council and all the Ministers of the National Government, at which
the Generalissimo and Madame Chiang and the American Ambassador

AMBASSADORSHIP OF JOHN LEIGHTON STUART

257

were also present. In this address he was strongly critical of the mili-
tary effort of the Government and of the corruption and inefficiency
prevalent in its ranks. He said in substance that the National Gov-
ernment could not defeat the Chinese Communists by force but could
win the loyal, enthusiastic and realistic support of the Chinese people
only by improving the political and economic situation immediately.
He stressed that the effectiveness and timeliness of these improvements
would determine whether the National Government would stand or
fall. 20 Although the General prefaced and concluded his remarks with'
expressions of genuine friendship for China, Ambassador Stuart
reported that those present at the gathering, predominantly of the
old scholar class, generally regarded the remarks as offensive. Presi-
dent Chiang was also apparently offended and, in bidding the General
farewell, chided him for allegedly refusing to see certain groups of
substantial persons in the cities visited. General Wedemeyer, how-
ever, protested his desire to see as many different types as his schedule
permitted. President Chiang also renewed his request that the Gen-
ral provide him with a list of names of Chinese with large financial
holdings abroad, but General Wedemeyer felt that since the names had
been given him in strictest confidence, he would have to refuse.

General Wedemeyer reinforced his views by a statement issued
at Nanking on August 24 at the time of his departure from China:

“In China today I find apathy and lethargy in many quarters^ In-
stead of seeking solutions of problems presented, considerable time
and effort are spent in blaming outside influences and seeking outside
assistance.

“It is discouraging to note the abject defeatism of many Chinese,
who are normally competent and patriotic and who instead should be
full of hope and determination.

“Weakened and disrupted by long years of war and revolution,
China still possesses most of the physical resources needed for her
own rehabilitation. Recovery awaits inspirational leadership and
moral and spiritual resurgence which can only come from within
China. . . .

“ . . . the existing Central Government can win and retain the un-
divided, enthusiastic support of the bulk of the Chinese people by re-
moving incompetent and/or corrupt people who now occupy many
positions of responsibility in the Government, not only national but
more so in provincial and municipal structures.

“There are honorable officials who show high efficiency and devo-
tion to duty, who strive to live within ridiculous salaries and such

30 See annex 133.

258

U. S. RELATIONS WITH CHINA

private means as they possess, just as there are conscientious business-
men who live up to a high code of commercial ethics. But no one will
misunderstand my emphasis upon the large number whose conduct
is notoriously marked by greed, incompetence or both.

“To regain and maintain the confidence of the people, the Central
Government will have to effect immediately drastic, far-reaching
political and economic reforms. Promises will no longer suffice.
Performance is absolutely necessary. It should be accepted that mili-
tary force in itself will not eliminate communism.” 21

CHINESE REACTION TO GENERAL WEDEMEYER’S STATEMENTS

The reaction in China to General Wedemeyer’s statement of August
24 was in general unfavorable except among the liberal opposition
groups. Typical of the reaction was an interview given by the
Prime Minister to the United Press in which he charged that Gen-
eral Wedemeyer had failed to understand the situation in China and
had not impartially sought his information. 22 The announcement
of General Wedemeyer’s Mission had led to expectations of imme-
diate aid and the effect of his speech to the State Council meeting
and his parting statement had served to dispel hopes of sub-
stantial assistance and had in turn caused resentment. The Chinese
Communists, apparently fearful of American aid, were also bitter
and in a broadcast of August 28 attacked General Wedemeyer in
strong terms. 23

Ambassador Stuart reported that on August 25, his own personal
secretary, Philip Fugh, had been quizzed by the Generalissimo re-
garding the background of the Wedemeyer Mission, as to why it was
regarded as necessary, and whether it meant that the United States
wished to force his (Chiang’s) retirement or removal. This inquiry
may have been prompted by General Wedemeyer’s reference to the
need for “inspirational leadership” in China. Ambassador Stuart
concluded that the General’s talk had been a “rude shock to the Chinese
Government,” but he felt that “most politically conscious non-parti-
san and liberal Chinese undoubtedly largely endorse all that the
Mission has said.” 24

General Wedemeyer was seriously concerned at the reaction to his
final press statement and to his talk before the State Council. A letter
which he wrote to the Ambassador on August 30 indicated his surprise
at the reaction :

21 See annex 134.

22 See annex 136.

23 See annex 137.

* For full text of the Ambassador’s report, see annex 141.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

259

“The members of my mission and I have carefully perused the
Chinese and American reaction to our final press statement. You
know and the Generalissimo should know that the objective was to
assist him in instituting reforms and reorganizing his government to
facilitate economic and political stability. You can reassure him that
all the members of my mission are friendly to China.

“As far as the reaction to my talk before the State Council and
the Ministers is concerned, the Generalissimo asked me to make this
talk and urged complete frankness. The Generalissimo’s Secretary
strongly reiterated that the Generalissimo wanted a frank appraisal
of my observations. You personally confirmed my hope when we
were returning from the talk that my frank appraisal was sorely
needed and was well received. You added that my statements were
made courteously and with due regard for the sensibilities of those
venerable officials who were present.

“The members of my Mission again join in thanking you and the
members of your staff for the assistance and courtesies they received.”

General Wedemeyer on September 8 repeated his concern over the
reaction in a letter to the Secretary of State as follows :

“Reference is made to Ambassador Stuart’s resume of my talk to
assembled Chinese officials, including the Generalissimo, members of
State Councils, and Ministers. The Generalissimo strongly and re-
peatedly urged this talk and Ambassador Stuart concurred. At the
conclusion the Ambassador stated that if my Mission served no other
useful purpose, the value of the talk fully justified the presence of the
Mission in China. I was particularly careful in presenting the data
in a courteous manner in order not to offend the finer sensibilities of
the venerable gentlemen and high officials present. I emphasized
that I made the talk upon the repeated request of the Generalissimo
to whom I had previously related observations. I refrained meticu-
lously from any hint or suggestion concerning my conclusions or pro-
jected recommendations. This visibly piqued and disappointed Chi-
nese officialdom. I prefaced the talk with the statement that I was
appearing before the assembled officials as a friend and not as a Presi-
dential envoy. My action requires no defense or apology. However,
the above information appears pertinent in the light of Ambassador
Stuart’s messages concerning the subject and also in view of both fa-
vorable and unfavorable Chinese reactions.”

Prior to his departure the Chinese Government had handed Gen-
eral Wedemeyer a memorandum setting forth an account of Kuomin-
tang accomplishments in the thirties, a justification of the Government
position and a reaffirmation of the Government’s determination to

260

U. S. RELATIONS WITH CHINA

see the civil war through to a successful conclusion. In this memoran-
dum the Government claimed that it had already undertaken most
of the internal reforms recommended by the United States. 25

RECOMMENDATIONS OF THE WEDEMEYER REPORT

Following a brief visit to Korea, General Wedemeyer returned to
Washington and on September 19 presented his confidential report
to President Truman. 26

The controversy in the United States surrounding this Report arose
largely from the fact that the United States Government did not make
it public. The President had originally requested this appraisal of the
situation in China for his own guidance and that of the Secretary of
State and not for public use. General Wedemeyer’s analysis of the
situation in China was in general similar to that submitted to the De-
partment of State in numerous reports by the American Embassy and
American consular officers in China and by General Marshall himself.
Among the recommendations of the Report, however, was one require-
ing immediate action by the United Nations to place Manchuria
under a Guardianship of Five Powers including the Soviet Union,
or a United Nations Trusteeship. It was the conviction of the Presi-
dent and the Secretary of State that any such recommendation, if
made public at that time, would be highly offensive to Chinese suscep-
tibilities as an infringement of Chinese sovereignty, and representing
the Chinese Government as incapable of governing Chinese territory.
It was also believed that it would no doubt be rejected by the Chinese
Government as it would in a sense represent at least a partial aliena-
tion of Chinese territory to a group of powers including the Soviet
Union. In any event, they believed that to place upon the United
Nations responsibility for action to implement such a recommendation
might well seriously endanger the future of that organization, which
at that time was already confronted with other grave and pressing
problems. The Generalissimo was confidentially advised by the Secre-
tary of State of the impediments this recommendation had placed in
the way of the publication of the Report, and vouchsafed no comment.

The Wedemeyer Report recommended in general that the United
States provide military and economic aid to China under a program
of assistance over a period of at least five years requiring Congres-
sional authorization. It also provided for financial assistance to
China for reconstruction projects and eventually for currency stabili-
zation, while at the same time recognizing : “The present fiscal situa-

28 See annex 138.

2a See annex 135 for full text of those portions of the Wedemeyer Report dealing
with China.

AMBASSADORSHIP OF JOHN LEIGHTON STUART 261

tion is inopportune for the introduction of a new currency or the
adoption of even an intermediate step towards stabilization.”

The Report indicated that improvement of the economic situation
through American aid should open the way for further constructive
support in the future from existing agencies, such as the Export-Im-
port Bank, the International Bank and Monetary Fund and private
Chinese and foreign capital. In its military phases the Report recom-
mended that military advice and supervision be extended in scope to
include field forces, training centers and particularly logistical agencies,
but it recognized the desirability of avoiding direct United States in-
volvement in the civil war by indicating : “Although advice indicated
above does provide advice indirectly to tactical forces, it should be
carried on outside operational areas to prevent the criticism that
American personnel are actively engaged in fratricidal warfare.”

In addition to the stipulations regarding action by the United Na-
tions, reference to which has been made previously, the Report
recommended other stipulations as precedent to United States aid :

“That China make effective use of her own resources in a program
for economic reconstruction and initiate sound fiscal policies leading
to reduction of budgetary deficits.

“That China give continuing evidence that the urgently required
political and military reforms are being implemented.

“That China accept American advisors as responsible representatives
of the U. S. Government in specified military and economic fields to
assist China in utilizing U. S. aid in the manner for which it is
intended.”

IV. INTERNAL DEVELOPMENTS IN CHINA

FOURTH PLENARY SESSION OF THE KUOMINTANG CENTRAL EXECU-
TIVE COMMITTEE

The Fourth Plenary Session of the Central Executive Committee
of the Kuomintang opened at Nanking on September 9, 1947, with the
announced purpose of consolidating the San Min Chu I Youth Corps
with the Kuomintang. There was, however, much speculation that
the Session would have a more important task. According to reliable
information the Generalissimo in his opening address, which was
largely a repetition of remarks he had made to the Standing Com-
mittee the preceding June, said that for twenty years he had been
attempting to implement the principles of Sun Yat-sen and that he
had to admit failure but was determined to continue. But he scath-
ingly denounced the Party for failing to solve China’s problems and

262

U. S. RELATIONS WITH CHINA

absolved himself from all responsibility. From this point he pro-
ceeded to charge that the members of the Kuomintang had also failed,
that the Communists had proved themselves abler and more devoted
and that without reform and rejuvenation the Kuomintang was
doomed to extinction. The Generalissimo asserted that China would
never again be dependent on the United States for assistance. He
said that China’s policy toward Japan was in line with that of the
Soviet Union, with which country China would have to strengthen its
relations, while preserving its traditional tie of friendship with the
United States. It is noteworthy that an elaborate if general program
of reform was proposed during the Session and that it was expected to
be adopted. At one of the final meetings, however, the Generalissimo
demanded that the reform program be dropped and that in its place
the Kuomintang proceed to carry out unfulfilled promises made during
the previous two years. The final manifesto of the Fourth Plenary
Session, published on September 13, 27 did not indicate any specific
accomplishments of the meeting.

On September 20 the Embassy reported its appraisal of the meeting
to the Department of State : 28 The reported reform was believed to be
related to the Wedemeyer Mission and to the desire to comply with
American requirements for assistance. The consolidation of the
Youth Corps was sought, however, in order to draw the younger
elements into the Party, and to eliminate the growing friction between
the Kuomintang and the Youth Corps. The consolidation achieved
by the meeting was reportedly not very successful, and the Cen-
tral Executive Committee accomplished very little. The Session in-
volved a sparring for position, which might lead to a purge. The
CC Clique emerged in a stronger position than previously, owing
to its control of the Youth Corps and its ability to exploit internal
and international conditions. The disappointing outcome of the
Wedemeyer Mission played an important role in the Session,
fcr it belied the expectations of the Government, which had expected
substantial aid or at least specific promises from that Mission.

In a further report on September 20 29 regarding the general situ-
ation the Embassy pointed out that the most disheartening feature
of the Chinese situation, in economic as well as in other fields, was
the overt reliance upon American aid to extricate China from its
pressing problems and a corresponding lack of self-reliance and self-
help in meeting these problems. The political, military, and economic
position of the Central Government was said to be continuously

27 See annex 142.

28 For full text of this report, see annex 143.

29 For full text, see annex 144.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

263

deteriorating, and the failure of the expected assistance from the
Wedemeyer Mission to materialize, combined with renewed Commu-
nist military activity, was intensifying a tendency to panic. Support-
ing the Generalissimo’s reference to the Soviet Union, thinly veiled
suggestions were emanating from high officials of the Chinese Govern-
ment to the effect that China might have to seek assistance from
that country, and that the Soviet Ambassador to China might be
asked to mediate in the civil war. Such talk was regarded as pri-
marily for effect on the United States, and secondarily as a reflec-
tion of a feeling of desperation among Chinese leaders. There was
also an increasing Chinese fear that the United States was tending
to shift the center of gravity of its Far Eastern policy from China to
Japan. The large-scale raid of Liu Po-cheng into Anhwei and south-
ern Honan was a matter of great concern, and the military situa-
tion in Shantung had deteriorated. The military situation in Man-
churia was said to be quiescent, but a sixth Communist offensive
was thought to be imminent. The expected Communist offensive
would probably be coordinated with one in North China. Commu-
nist radio broadcasts had stated that the offensive to “liberate”
China north of the Yangtze had been launched, but it was not thought
that this objective would be attained “within the foreseeable future.”
It was disheartening to see the Chinese reliance on the deus ex machina
of American aid, as illustrated by the presumption that the deficit
in China’s balance of payments would be met by the United States
in one form or another.

On September 27 the American Consul General in Shanghai
reported that the CC Clique there was increasing its power and
dominating the Kuomintang’s preparations to ensure that the suc-
cessful candidates in the coming election were “elite party supporters
plus such few political beggars as it may seem expedient to accept
as window dressing.” In this connection the Consul General for-
warded reports that T. V. Soong had made a bargain with the CC
Clique which involved his appointment as Governor of Kwangtung
and that H. H. Kung was presumably involved in the bargain.
Shanghai reports also indicated that the Government’s anti-Ameri-
canism at this time had been inspired by the right wing of the
Kuomintang, which found it an effective method of weakening the
Political Science group.

AMBASSADOR STUART’S REPORT OF SEPTEMBER 29, 1947

Two days later, Dr. Stuart reported to the Department as follows :

“There is not much evidence yet of success in dealing with graft,
which is becoming more prevalent in the worsening economic situation.

264

U. S. RELATIONS WITH CHINA

But President Chiang is at least trying to tackle the problem. The
Control Yuan has been given considerably more authority with instruc-
tions to exercise it in this matter. One hears constantly of those who
have been brought to trial. An instance, which is a somewhat acid
test for any Chinese official, is the son of an old and honored friend of
President Chiang, now at the head of the Postal Administration but
charged with flagrant speculation, whom President Chiang ordered
to be punished according to law regardless of all other considerations.

“The powers of the local police are being enlarged as part of the
plan for eliminating or at least restricting the activities of military
police and secret service men. . . .

“There are not a few hard-working, public-spirited progressives
in the Government who share our dissatisfaction with it and who
earnestly desire for their country all that we have expressed as our
hope for China. But their difficulties are very real. Just to mention
one of many, the members of the two minority parties brought in to
broaden the basis of the Government are showing themselves to be
even more rapacious for office and its perquisites than many of the
Kuomintang, with no improvement in administrative efficiency.
These progressives and their many sympathizers outside would be
immensely heartened by some indication of our intention to assist
them and would, in my opinion, be the nucleus through which we can
go a long way toward realizing our aims for China and for a stable
peace in this part of the world. But they do not see much hope with-
out such aid from us and any authoritative indication of our policy
would be very reassuring.”

On October 11, members of the Military Affairs Committee of the
American 'House of Representatives who were visiting in China called
on the Generalissimo. In answer to their questions he stated his belief
that the Chinese Communists were thorough-going Communists,
working in collusion with and taking orders from Moscow, and that
they constantly received supplies from Russia. He repeated his re-
quest for greater American aid and then said that “the predicament
in Manchuria was an American responsibility.” In conclusion he said
that if the Government were finally defeated it would not be because
of Russia or the Chinese Communists, but because the United States
had failed to give promised assistance at a time of desperate need.

In a report to the Department on October 29, Ambassador Stuart
found no reason to change his previous estimates. 80

30 See annex 145.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

265

OUTLAWING OF THE DEMOCRATIC LEAGUE, OCTOBER 28, 1947

Additional developments concerned the minor parties. Partly as a
result of Government pressure, and partly as an indication of dis-
sension within its own ranks, Carson Chang’s Social Democratic Party
was bitterly split during August and September and ended up as two
separate groups with consequent diminution of such influence as it
had possessed. Henceforth little was to be heard of it except for that
faction which joined with the Government and became largely a
rubber-stamp of the Kuomintang.

During September and October there were increasingly frequent
reports that the Government was planning action against the Demo-
cratic League on charges that it was subservient to the Communists.
Finally, on October 28, an official decree outlawed the League and
made it subject to the provisions of the General National Mobilization
Order of July 4. 31

The prominent leaders of the party were not arrested and, as a result
of negotiations between the League and the Government, the League
on November 6 announced its formal dissolution. 32 The Government
decree was never revoked and it was apparent that the Generalissimo
was determined to eliminate the League from public activities. 33

POSSIBILITY OF RESUMPTION OF PEACE NEGOTIATIONS

During the winter of 1947-1948 rumors of peace negotiations with
the Chinese Communists again became current. This time the pos-
sibility of Russian mediation was injected. On December 20, 1947,
General Chang Chih-chung, who had played a leading role in the
negotiations while General Marshall was in China, told the American
Ambassador that he had recently discussed the situation with the
Generalissimo. He had argued with the Generalissimo that the only
solution lay in the resumption of the PCC resolutions, but the latter
remonstrated that he could not take the initiative — though he would
not object if General Chang made cautious inquiries. General Chang
also told Ambassador Stuart that prior to his conversation with the
Generalissimo he had approached the Soviet Embassy in Nanking
for help in persuading the Chinese Communists to resume peace talks.
He had warned the Russians that China could never be won over to
Russia against the United States, and had insisted that in aiding
China the United States had no ulterior motives against the Russians.
He said the Russians seemed impressed, and in reply to their inquiry

81 See annex 146.

83 See annex 147.

33 See annex 148.

266

U. S. RELATIONS WITH CHINA

as to what they might do, he said that they might advise the Chinese
Communists to stop fighting.

On the other hand a statement was issued on December 25 by
Chairman Mao Tse-tung of the Central Committee of the Chinese
Communist Party. 34 The statement was one of triumph and confi-
dence, as well as a series of vitriolic attacks on the United States
as the great enemy of the world and the agent responsible for con-
tinuing the civil war in China.

Subsequently the private secretary to the Generalissimo confirmed
to the Embassy that the Russians had offered to mediate in the Chinese
situation. The secretary stated emphatically, however, that the
Generalissimo had not given his approval to the activities of General
Chang Chih-chung and that the Chinese Government neither desired
nor believed possible any accommodation with the Chinese Commun-
ists at that time. However, it was increasingly apparent during Jan-
uary 1948 that there were elements in the Chinese Government which
favored a political settlement. The Embassy on January 23 reported
to the Department its belief that something might come of this trend
in favor of negotiations because of the increasingly unfavorable posi-
tion of the Government, and the apparent determination of the Chi-
nese Communists to carry the fighting to Central and South China. It
was clear that responsible Chinese Government officials were also
concerned by this latter possibility.

On February 6 the Ambassador found that the Chinese Foreign
Minister was seriously perturbed over the military situation in Man-
churia. The Foreign Minister stated that he believed the renewed
attacks by the Chinese Communist forces on Mukden arose from the
Chinese refusal of the Russian offer of mediation. He told the
Ambassador that the Soviet Charge d’Affaires, acting on instructions,
had requested protection for Russian citizens in Manchuria. When
the Charge remonstrated that the Soviet Union had never given China
cause for misgiving, the Foreign Minister reminded him of the be-
havior of Russian troops after entering Manchuria in August 1945.

On March 8 the Embassy at Nanking commented as follows on
these and related developments :

“There is increasing evidence that despite the announced inten-
tion of present Government leadership to continue the civil war,
strong opposition to this policy by civil and military officials, as well
as by the general public, particularly the intellectuals, may soon
become sufficiently strong to compel present leadership to abandon
this policy in favor of negotiated peace or face the threat of being

34 See annex 149.

AMBASSADORSHIP OF JOHN LEIGHTON STUART 267

discarded. It is difficult at the moment to define precisely the scope
of this opposition or its strength, but the fact of its existence or of
its growth can hardly any longer be denied. The disintegration and
decay which has characterized all phases of the Government’s activi-
ties during the past several years continues and in recent weeks has
been accentuated. It is increasingly apparent that the Government
is over-extended militarily, with resulting inability to prevent con-
tinued economic deterioration and has reached a point where its over-
all political control is imperiled.

“The Government now exerts only a tenuous control over approxi-
mately one per cent of Manchuria and not more than ten or fifteen per
cent of that part of China proper north of the Yellow River. Between
the Yellow River and the Yangtze there are strong Communist ele-
ments and there has been infiltration even south of the Yangtze.
Government forces are hard pressed and on the defensive in prac-
tically every theater. There is increased demoralization, a fatalistic
feeling that collapse of the government is inevitable, and a decided
trend toward regionalism; each regional leader is looking about for
means to defend himself against the Communists when he can no
longer call on Nanking.

“With this alarming situation there is need for inspired leadership
which is not forthcoming. Those in control of the government seem
almost frantic in their search for solution, yet incapable of taking the
necessary initiative. Increasingly, it is the Generalissimo who must
make the decisions and he continues the slave of his past and unable
to take the drastic measures required. He may be expected, we believe,
doggedly to continue the fight with the idea that if worse comes to
worst, he can withdraw to Canton where T. V. Soong is engaged in
building a stronghold, and let regionalism again prevail. There is,
however, likelihood that opposition within the Government may not
permit this course of action. This opposition is well aware of the
perils of Soviet mediation, but appears inclined to prefer such media-
tion to a continuation of the current struggle, the only end to which
they increasingly fear will be a Communist-dominated China.

“Such a negotiated settlement would likely require the disappear-
ance from the political scene of the present dominant leadership,
including the Generalissimo. Yet, we cannot rule it out. While
present criminally inept and wasteful strategy can postpone tempo-
rarily the loss of major strategic points, it cannot do so indefinitely.
By far the greater part of the Government’s military and economic
resources have been committed to Manchuria and North China. De-
spite the scale of this commitment it has not forced, and shows no
sign of forcing, a decision on the Government’s behalf. Failing

268

U. S. RELATIONS WITH CHINA

American economic aid on an impossibly large scale, failing active
American military aid, and failing competent Chinese leadership and
planning, there may be revolt within the ranks of the Kuomintang
and acceptance of the Soviet offer to mediate in the forlorn hope that
such a compromise would give a breathing spell for regrouping, con-
solidation, and the emergence of some dynamic quality that would
again create the will to victory now lacking. The dangers of coalition
with Communists are well known to those in opposition. Most likely
accommodation would, therefore, be on a purely territorial basis which
would, in effect, be but a temporary, though perhaps prolonged, truce.
In any case, we feel it is entirely possible that non-Communist ele-
ments released by such event from the dead traditional hand of pres-
ent leadership, might rally to American assistance with a complemen-
tary possibility of the development of political, economic and spiritual
resources, which might eventuate in stable non-Communist govern-
ment in Central and South China.”

ELECTIONS TO THE NATIONAL ASSEMBLY

In the meantime, the principal internal preoccupation apart from
the civil war had been, as it would continue to be for the next
six months, the elections for the National Assembly — the Assembly
itself was to establish the first constitutional government — and the
struggle within the Kuomintang for power. This interest was mani-
fested in a series of political crises. Despite predictions and specula-
tion to the contrary, the Government held the elections late in 1947
according to schedule. In the absence of the Communists and the
Democratic League, these elections were between the various factions
in the Kuomintang and the two minor parties, the Social Democrats
and the Youth Party, which had agreed to participate. For a number
of reasons the results were slow in coming in, though there was little
doubt as to the eventual outcome. In the end it was apparent that
majority influence in the new National Assembly and the Legislative
Yuan would lie with the CC Clique, the extreme right-wing faction
of the Kuomintang. It was precisely here that the Government found
itself confronted with an ironic situation. It was publicly committed
to a certain proportional representation by the minor parties, but when
the results were tabulated it was seen that practically none of the
minor party candidates had been successful, and that they had lost to
either the CC Clique or independent Kuomintang candidates. The
Government was faced with the difficult and embarrassing necessity of
persuading successful candidates to withdraw after they had won, in
order to comply with the commitment on broadening the Government.
This was only made possible by an ex post facto declaration that only

AMBASSADORSHIP OF JOHN LEIGHTON STUART

269

those Kuomintang candidates would be considered successful who had
prior approval of the Party. This decision was later to create difficulty
for the Generalissimo at the spring meeting of the National Assembly,
which decided to rebel against his authority. Even the over-all victory
of the CC Clique would later prove, in part, illusory on a national scale.
It also became apparent that the real strength of the CC Clique lay in
its control over local administrations.

DISTURBANCES IN SHANGHAI

Early in February there was an outbreak of disturbances in Shang-
hai, attended by some loss of life and destruction of property. The
discontent this time did not center in any one particular group but
appeared to be fairly general throughout the city and to be a general
reflection of discontent with the manner in which the Government was
prosecuting the war and handling civil administration. Neither the
Embassy nor the Consulate General in Shanghai believed, however,
that these disturbances forecast any imminent over-all breakdown of
law and order, especially in view of the determined and imaginative
action by the mayor. They felt, rather, that the disturbances were
more the signs of things to come. 30

V. REDEFINITION OF AMERICAN POLICY

CONSIDERATIONS UNDERLYING THE FORMULATION OF A PROGRAM
OF AID TO CHINA

For several months prior to October 1947, the Department of State,
together with the National Advisory Council, had been making studies
of China’s balance-of-payments position with a view to its bearing on
a program of further aid to China. In the latter part of October the
Department of State began the formulation of such a program.

In this connection several basic factors had to be taken into con-
sideration : It was recognized that in the main the solution of China’s
problems must largely be a task for the Chinese themselves. A United
States program of aid to China should not be such as would place the
United States in the position of direct responsibility for the conduct of
the fighting in China or for the Chinese economy. The United States
Government could not virtually take over the Chinese Government
and administer its economic and military affairs. Any such under-
takings would have involved the United States in a continuing com-
mitment from which it would have been practically impossible to with-
draw regardless of circumstances or of Chinese Government actions.

M See annex 150 (a) and (b).

270

U. S. RELATIONS WITH CHINA

Account also had to be taken of the heavy burden of foreign aid which
the United States was assuming elsewhere and of the limitations on
the extent to which American resources could be drawn upon for
foreign aid under the peacetime organization of its economy.

Secretary Marshall reflected these considerations when, during the
hearings on the China aid program in February 1948, he stated that
an attempt to underwrite the Chinese economy and the Chinese Gov-
ernment’s military effort represented a burden on the United States
economy and a military responsibility which he could not recommend
as a course of action for this Government. Nevertheless, it was be-
lieved that the United States should do what was feasible under exist-
ing circumstances and that the proposed program of aid for China
would, as the President stated to the Congress on February 18,
1948, “assist in retarding rapid economic deterioration and thus give
the Chinese Government a further opportunity to initiate the meas-
ures necessary to the establishment of more stable economic condi-
tions. But it is, and has been, clear that only the Chinese Government
itself can undertake the vital measures necessary to provide the frame-
work within which efforts toward peace and true economic recovery
may be effective.”

The new proposal did not call for a long-term recovery program ex-
tending over 5 years, as recommended by General TVedemeyer. As
Secretary Marshall stated before the House Committee on Foreign
Affairs on February 20, 1948, “it is very necessary to have in mind
that a proposal at the present time cannot be predicated upon a defi-
nite termination for the necessity of such assistance as in the case of
the European Recovery Program.” It was evident that no long-
range recovery program could be developed until the Chinese Govern-
ment had demonstrated its capacity to take, with substantial United
States assistance, initial steps toward laying the basis for further con-
structive efforts. The Department of State’s program thus called for
aid over a 15-month period during which the Chinese Government
would have a further opportunity to take initial steps to this end.

With respect to the question of military aid, as recommended by
General Wedemeyer, the Department of State’s proposed aid program,
calling for 570 million dollars in economic assistance, was sufficiently
large to free the major portion of the Chinese Government’s own for-
eign exchange assets for the purchase of such military supplies as it
might wish to obtain from foreign sources. It was not considered
desirable that the United States embark upon a military aid pro-
gram calling for the use of United States military advisers in combat
areas or upon measures of military aid which would have led to United
States military intervention in China or to direct United States in-

AMBASSADORSHIP OF JOHN" LEIGHTON STUART

271

volvement in China’s civil strife. For these reasons, it was considered
that the Chinese Government’s requirements- for military materiel from
foreign sources should be met through purchases from its own
resources, largely freed for such use through the proposed program
of economic aid, and that the existing United States military advisory
groups in China would enable the United States to extend advice and
assistance within the framework of the considerations outlined
above.

It was against the background of these considerations that the
Department of State’s proposed China aid bill was presented to the
Congress in February 1948. The Congress passed legislation author-
izing aid for China on April 2, 1948, the title of which was the China
Aid Act of 1948. The Department’s proposals for a program of aid
to China and Congressional action on these proposals are described
in greater detail in chapter VIIL

SECRETARY MARSHALL’S PRESS CONFERENCE OF MARCH 10, 1948

Meanwhile the question of American policy toward China was
again suddenly and inadvertently raised. In an interview with
an American correspondent early in March, the remarks made
by the American Ambassador were misinterpreted to mean that
he favored a coalition government. Despite his clarification on the
following day, some confusion persisted. At Secretary Marshall’s
regular press conference on March 10, a correspondent, referring to
Congressman Fulton’s statement before the House Foreign Affairs
Committee that there had never been a disavowal of American policy
favoring a coalition government in China to include the Communists
and that this apparently was still American policy, asked the Secre-
tary if this were so. Secretary Marshall replied that the principals,
Chiang Kai-shek and the head of the Communist Party, Mao Tse-
tung, had reached a partial agreement in September 1945. Then, he
said, in November 1945 they had reached a formal agreement for a
meeting of the Political Consulative Conference, and on December 17
there had been another agreement between Mao Tse-tung and Chiang
Kai-shek, the basis of it being that it was to bring all Chinese parties
together in a discussion to endeavor to settle the problem by political
means. On December 15 President Truman had announced his state-
ment of the policy of the United States Government. Secretary Mar-
shall pointed out that the terms had been expressed in very broad
language, that is, that the Chinese should widen the basis of their gov-
ernment and give representation on a broad basis. Asked if this were
still our policy, Secretary Marshall replied in the affirmative, pointing

272

U. S. RELATIONS WITH CHINA

out that it was not intended to force the Chinese to do this on the basis
of any issues which had previously arisen.

For the background of the correspondents, Secretary Marshall
pointed out certain essential differences between the situation in
China and the situation in European countries. In China a single
party, the Kuomintang, and the Government had been practically
identical for some time. The problem of “coalition” in the European
sense, where various established parties exist, did not really arise in
the Chinese situation. What did arise was the question which the
Chinese themselves had been discussing for some time of granting
parties other than the Kuomintang, including the Communist Party,
some representation in at least the legislative branches of the Gov-
ernment. Neither the Communist nor any other party except the
Kuomintang had had any representation in the legislative branch.
The Secretary explained that, when he was in China, the Chinese
Nationalist Government was following a policy of settling its disputes
with the Communists as a political matter on the basis of negotiation
instead of using force for their suppression. He had participated as
a mediator in these discussions.

Since these remarks also were misinterpreted, the Department of
State issued the following release on March 11 :

“In view of misunderstandings that have arisen concerning the
Secretary’s statements about China at his March 10 press confer-
ence, it is pointed out that the Secretary referred to President
Truman’s statement of December 15, 1945. That statement ex-
pressed the belief of the United States That peace, unity and demo-
cratic reform in China will be furthered if the basis of this Govern-
ment (China’s) is broadened to include other political elements in
the country’. The Secretary said that this statement still stands.
When asked specifically whether broadening the base of the Chinese
Government meant we favored the inclusion of the Chinese Com-
munist Party, he replied that the Communists were now in open
rebellion against the Government and that this matter (the deter-
mination of whether the Communists should be included in the
Chinese Government) was for the Chinese Government to decide,
not for the United States Government to dictate.”

PRESIDENT TRUMAN’S PRESS CONFERENCE OF MARCH 11, 1948
On the same day, questions were put to the President at his press
conference concerning the inclusion of Chinese Communists in the
Chinese Government. The President was specifically asked whether
he still supported the statement he had made on December 15, 1945.
The President replied that this statement still stood. In answer to

AMBASSADORSHIP OF JOHN LEIGHTON STUART

273

further questions, he explained that it was.not the policy of the United
States to urge the National Government of China to take Com-
munists into the Government, but that the policy of the United States,
which had further been carried out by General Marshall on his mission
to China, was to assist the Chiang Kai-shek Government to meet the
situation with which it was confronted. He expressed his hope that
the Chinese liberals would be taken into the Government, but stated
that “we did not want any Communists in the Government of China
or anywhere else if we could help it.”

VI. CHANGES IN THE CHINESE GOVERNMENT

ELECTION OF PRESIDENT CHIANG AND VICE PRESIDENT LI TSUNG-
JEN

Events were now moving toward the first constitutional Assembly,
which was to meet on March 29 for the election of the President and
the Vice President. It was anticipated that this meeting would be a
crucial one for the Government, and the Embassy in its reports of
March 17 and March 31 saw nothing to warrant any optimism. 36
Practically the entire time and attention of prominent members of
the Government during these days were taken up with the struggle for
allocation of seats in the Assembly and, subsequently, in the jockeying
for position over the election for President and Vice President. The
struggles reached such extremes that at one point certain disappointed
aspirants to the National Assembly staged a hunger strike at a Nan-
king hotel. Actions such as this at this desperate point in the history
of the Government only served to increase dissatisfaction with and
criticism of the Government and, in particular, the Generalissimo. In
answer to this criticism the Generalissimo made it clear that he would
not accept the office of President. He offered to serve his country in
any other capacity but it was known that he was considering the
presidency of the Executive Yuan and would allow the office of Presi-
dent to become similar to that of the President of France. Early in
April, he instructed the Party to vote for Dr. Hu Shih, the distin-
guished Chinese scholar and former Ambassador to the United States,
as President, and Dr. Sun Fo, son of the founder of the Republic, as
Vice President. The immediate reaction was an almost unanimous
demand in the Assembly that the Generalissimo reverse his position
and accept the office. Bowing to the popular will which acclaimed
him as the only possible choice, he accepted. This resulted in a great

38 See annex 151 (a) and (b).

274

TT. S. RELATIONS WITH CHINA

increase in his prestige, though not sufficient to enable him to impose
his will in the vice-presidential election.

The three leading contenders for the Vice Presidency were Dr. Sun
Fo, who was the choice of the Generalissimo; General Ch’eng Chien,
one of the oldest and highest ranking generals of the army and Gov-
ernor of Hunan ; and General Li Tsung-jen, a member of the Kwangsi
Clique and for many years one of the most prominent members of the
Kuomintang. General Li had staged a highly successful campaign
and had succeeded in rallying around himself most of the liberal and
other elements in the Assembly strongly desirous of reform and
changes in the Government. Resolution of this conflict required many
days of political juggling and several ballots, but in the end General
Li won, despite all the pressure which the Generalissimo brought to
bear on recalcitrant members of the Assembly. Immediately fol-
lowing this election there was widespread hope that a genuine and
inspired reform movement would now arise to bring about those
changes which all agreed were necessary if the National Government
were to avoid disaster. In time, however, it became apparent that
nothing of the sort would happen.

General Li himself took no action, despite all rumors, and claimed
that he could do nothing because the Generalissimo still controlled the
Party machine, Government finances, and the army. It was typical
of the manner in which the Generalissimo set about disciplining the
Party rebellion that at the Presidential inauguration the newly-elected
Vice President was left entirely in the background, and when the
Presidential party drove off after the inaugural ceremonies he was
ignored. These developments did not augur well for the future of
unity in prosecuting the war against the Communists, and the hopes
aroused by the election of General Li on what was, in effect, a popular
movement for change and reform, were soon shattered . 37

THE SEARCH FOR A NEW EXECUTIVE YUAN

The struggle for power within the Kuomintang was carried over
into the search for a new Prime Minister and Executive Yuan. The
names most prominently mentioned for the premiership were those of
General Ho Ying-chin ; the incumbent, General Chang Chun ; Dr. T. V.
Soong; and the Foreign Minister, Dr. Wang Shih-chieh. The Gen-
eralissimo appears to have favored General Ho but refused to meet
his conditions. In the end the compromise selection was Dr. Wong
Wen-hao, an eminent geologist, chairman of the National Resources
Commission, and a man of unquestioned personal integrity, but totally
without political following. It was apparent that the new Govern-

87 See annex 152 (a)-(n).

AMBASSADORSHIP OF JOHN LEIGHTON STUART

275

ment was composed of loyal followers of the Generalissimo and that
he would continue to have the final word on all decisions. Public
reaction to the new Government was generally unfavorable and the
preliminary reports of the Government and the Legislative Yuan gave
little hope for confidence. 38

The Ambassador reported to the Department on June 24 as follows :

“The crucial problem is still the personality of President Chiang.
He is fully cognizant of the current deterioration. He listens patiently
to warnings as to the inevitability of disaster unless new policies are
adopted and to suggestions regarding these. He seems sincerely de-
termined to act in accordance with the theory of his new office and
under constitutional procedure. But there is actually very little change
in his methods.

“I had been hoping that with the appointment of General Ho Ying-
ch’in as Minister of National Defense the military operations would
be delegated to him with real authority and that General Barr could
work closely with him. 39 I had urged this course upon the President
and had received his assurance of agreement provided only he were
kept constantly informed. I had also discussed the matter more than
once with General Ho who heartily concurred in the advisability of
this plan and promised that he would do his best. Yet the President
has just issued an order that all operations are to be carried out under
instructions from him through the Chief-of-Staff — the incompetent Ku
Chu-t’ung !

“General Pai Ch’ung-hsi had been relieved of his post as Minister of
National Defense, presumably for helping in the election of Li Tsung-
jen. He was then offered the important task of commanding the
troops in the five provinces between the Yellow and Yangtze Rivers
and after long hesitation accepted, only to learn that he would not be
allowed to organize local militia in this area — a feature which he has
always strongly advocated — and that certain regions, such as that sur-
rounding the Wu Han cities, would be out of his jurisdiction. He
thereupon withdrew his acceptance and left in disgust for Shanghai.
The President showed no regret and remarked that this was of no
importance. He seems suspicious that the Kwangsi Clique have
designs against him and is thus alienating, or at least losing the effec-
tive cooperation of, men who by every test have been loyal both to him
and to the national cause.

“These instances of recent happenings will seem grimly familiar to
you. I have more than ever a sense of frustration in endeavoring to

“See annex 153 (a)-(e).

39 General Barr’s mission is discussed below, chapter VII.

276

U. S. RELATIONS WITH CHINA

influence the President’s thinking. I have an easy access to him and
am invited to say anything to him without reserve. No Chinese dares
to say to him what many even among his closer associates are now
thinking and they are looking to me with a pathetic expectancy. And
yet I feel impotent to accomplish anything that helps to reverse the
downward trend.

“There is a very wide-spread anti-American sentiment crystallizing
in protests against our efforts to strengthen J apan. This is being re-
vealed by the vehement attacks upon my message to the students . 40
It is rather puzzling to account for this phenomenon. To explain it
as due entirely to Communist or Soviet instigation is an oversimpli-
fication. This has of course helped to create it by skillful propaganda
and to organize it by agents planted both among faculties and students.
But there must be a receptive mood to have produced so general a
response and among so many who are normally pro-American. This
is perhaps caused in large part by a fear of Japan which began in the
closing years of the last century and has become instinctive as well as
deeper than we can readily imagine. It is aggravated by distorted
reports of our activities in Japan, including those from Chinese offi-
cial sources, by misconceptions and false inferences, by the publication
of the Draper [report on the industrial potential and reconstruction of
Japan] and similar reports, by the cynical assumption that we would
not hesitate to sacrifice China in preparing for our private war with
Russia, and of course by deliberate, unremitting and malicious propa-
ganda. Another very real factor is the all but universal dissatisfac-
tion with the present Government and the irrational but easily under-
standable association of America with its existence or its failings. The
students, more highly sensitized than other elements of the population,
are utterly dispirited and with no proper outlet for their patriotic
urgings. An agitation against America for restoring their old enemy
to a position of becoming again a potential menace has a curious appeal
under these depressing circumstances. Apart entirely from these
forebodings and their utilization by Communist and other anti-Gov-
ernment factions are the selfish and shortsighted commercial or indus-
trial groups which seek to avoid Japanese competition. The extremely
profitable and perhaps none too efficient Shanghai textile industry, for
instance, wishes to maintain for itself the Chinese and Southeastern
Asia markets. Thus 1 strangely enough the extreme left and crassly
capitalistic interests unite in disapproving our intentions in Japan.
We cannot be too careful in carrying out those intentions to give no
slightest cause for reasonable misapprehension.”

40 See below, p. 277.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

277

STUDENT RIOTS

The students, to whose attitude Ambassador Stuart referred, made
known their discontent in a series of riots and demonstrations which
extended throughout the length and breadth of the country and even
into Manchuria, wherever student groups were found. As usual, the
disturbances began in May as examination time approached, and
there were many who again thought that they would die down when
the examination period had passed. But this time there was more
substance to the agitation, and it continued with greater or lesser
intensity deep into the summer. The students had learned the lesson
of previous years of Government repression of their activities and
this time, instead of attacking the Government to reveal their dissatis-
faction with their situation, they chose to attack the Government
indirectly by protesting American policy in Japan. In this campaign
they were abetted by other groups who honestly or for ulterior reasons
disapproved of that policy. By early June the anti-American dem-
onstrations had become so violent and irrational that Dr. Stuart felt
compelled to appeal to his long relationship with Chinese academic
groups. He therefore on his own initiative issued a statement, 41 which
had a sobering effect on many of those to whom it was addressed, but
the agitators who had seized control of the movement for other pur-
poses managed to keep the disturbances going for many weeks. With
the passage of weeks, interest shifted to other and more pressing sub-
jects. On August 17 the Executive Yuan issued an order forbidding
disturbances which were calculated to give aid and comfort to the
enemy , 41a and the movement quickly collapsed.

During July the Embassy and the Consulates, in a series of reports
to the Department, had outlined in some detail the situation and their
concern with it. 42 On July 30 the Ambassador summarized his views
as follows :

“We can be quite certain that no amount of military advice or ma-
terial from us will bring unity and peace to China unless indeed there
are reforms sufficiently drastic to win back popular confidence and
esteem. That these could even be attempted by those now in power or
that the improvements could be rapid and radical enough to reverse
the prevailing attitude is scarcely to be hoped for. But without this
assurance the intention to give increased military aid ought to be
carefully considered in all its implications. Even under the most
hopeful conditions such aid would probably require some two years

41 See annex 154.

41a See annex 155.

42 See annex 156 (a) -(d).

278

U. S. RELATIONS WITH CHINA

or more from next January to accomplish its objective in view of the
basic necessity of training new divisions and of recovering lost
territory and morale.”

ECONOMIC REFORM DECREES OF AUGUST 19, 1948

In a desperate move to stem the tide of economic deterioration, the
Government on August 19 promulgated a series of drastic reform
measures, which are treated in greater detail elsewhere in this paper. 43
These measures produced a temporary boost in morale in many parts
of the country and public opinion in China initially felt that if they
were forcefully implemented there was a chance of salvaging the
situation. The test case was Shanghai, where the Generalissimo ap-
pointed his son, General Chiang Ching-kuo, as economic czar. At the
outset young Chiang gave every indication that he would carry out
his orders ruthlessly and he announced that special privilege would
receive no consideration. Before many weeks had elapsed, however,
it became apparent that he was attacking vested interests stronger
than himself. The basic fallacy of the August decrees was that they
failed to provide the necessary and sufficient measures for a genuine
currency reform or to take account of the conditions which had created
the crisis. Instead, they attempted to freeze the situation by the impo-
sition of police measures which paralyzed the economic life
of Shanghai and other urban centers and in the end further worsened
the situation of small and medium businessmen without appreciably
affecting the major operators. 4311 Repression could hold the line for a
few weeks, but as trade came to a standstill, as the note circulation
increased and as the refusal of producers to send stocks of foodstuffs
into Shanghai created an emergency food shortage, the artificial con-
trols gave way to pent-up economic pressures and the tempo of
economic deterioration reached an unprecedented rate. The military
disasters which were about to strike served to accentuate the deteriora-
tion. On November 1 Chiang Ching-kuo resigned. 44

It was symptomatic of the situation that on November 4 the official
Kuomintang organ, the Chung Yang Jih Pao , should publish an
editorial highly critical of the Government suggesting that it might
well learn something from the Chinese Communists. 45

As the situation became worse for the National Government, the
Communists in their turn not only reflected growing confidence but
also a heightened stridency in their attacks on the United States. Fol-

43 See p. 396.

43a See annex 157 (a)-(c).

44 For his statement at the time of his resignation, see annex 158.

43 See annex 159.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

279

lowing a period of seeming conciliation, they returned to their former
line that the United States was the great enemy. In so doing their
statements came more and more to resemble the Kremlin propaganda
line. 48

VII. ALTERNATIVES OF AMERICAN POLICY

SECRETARY MARSHALL’S POLICY DIRECTIVES OF AUGUST 12 AND
13, 1948

During these depressing and disastrous months the Government in-
creased its efforts to secure additional American aid, not only through
direct approach but also through publicity. Both the Embassy and
the Department of State felt an increasing need to review American
policy and to determine what, if any, changes should be made.

On August 10 the Embassy, after reviewing the military, eco-
nomic, and psychological factors of the situation, recommended (1)
that “American efforts be designed to prevent the formation of a coali-
tion government” including Communists in the light of the history of
such coalitions in other areas of the world and that continued or
increased support of the National Government was the best means to
this end, although it was possibly already too late; (2) that, if the
march of events resulted in some kind of an accommodation with the
Chinese Communists, American “influence should be used to arrange
a cessation of hostilities on a basis of a very loose federation with
territorial division which would leave as large an area of China as
possible with a government or governments free of Communist par-
ticipation”; and (3) that, in the event of a return to regionalism in
China, American economic aid be given to strengthen regional gov-
ernments so as to “permit basic anticommunist Chinese characteristics
to reassert themselves and correspondingly weaken sympathy for the
Communists.” 47

The Secretary of State on August 12, 1948, outlined the following
points for the Embassy’s general guidance :

“1. The United States Government must not directly or indirectly
give any implication of support, encouragement or acceptability of
coalition government in China with Communist participation.

“2. The United States Government has no intention of again offer-
ing its good offices as mediator in China.

49 See annex 160. For a recent statement in this vein by Mao Tse-tung, see
annex 120.

4T For full text of the Embassy’s report, see annex 161.

280

U. S. RELATIONS WITH CHINA

“Overt United States opposition to Chinese Government compro-
mise with the Chinese Communists (or even secretly expressed
opposition, which would likely become known) would at this junc-
ture provide ammunition in China for propaganda alleging that
the United States was encouraging and prolonging the civil war. It
could also mislead the Chinese Government to expect unlimited aid
which could not eventuate under the existing world situation and in
any circumstances would require congressional action. Any informal
expression of United States Government attitude toward these ques-
tions should, at this stage of developments in China, be confined to
the two points outlined above. You should, of course, overlook no
suitable opportunity to emphasize the pattern of engulfment which
has resulted from coalition governments in eastern Europe.”

On August 13 Secretary Marshall observed :

“While the Department will keep actively in mind the questions
raised, it is not likely that the situation will make it possible for us
at this juncture to formulate any rigid plans for our future policy in
China. Developments in China are obviously entering into a period
of extreme flux and confusion in which it will be impossible with
surety to perceive clearly far in advance the pattern of things to come
and in which this Government plainly must preserve a maximum
freedom of action.”

POLICY REVIEW OF OCTOBER 1948

Toward the end of October the Embassy again pointed out the con-
tinuing deterioration and inquired whether there had been any changes
in Washington. To this the Secretary replied :

“There is general agreement with your assumption that the United
States purposes in the Far East would as in the past be best served by
the existence of political stability in China under a friendly Govern-
ment, and American policy and its implementation have been con-
sistently directed toward that goal. However, underlying our recent
relations with China have been the fundamental considerations that
the United States must not become directly involved in the Chinese
civil war and that the United States must not assume responsibility
for underwriting the Chinese Government militarily and economi-
cally. Direct armed intervention in the internal affairs of China runs
counter to traditional American policy toward China and would be
contrary to the clearly expressed intent of Congress, which indicated
that American aid to China under the $125,000,000 grants 47a did not in-

47a See chapter VIII.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

281

volve the use of United States combat troops nor United States per-
sonnel in command of Chinese troops. Public statements in Congress
by leaders of the Senate Foreign Relations Committee, which initiated
Section 404 (b) of the China Aid Act, indicated that aid to China
under the $125,000,000 grants must be completely clear of the impli-
cation of the United States underwriting the military campaign of
the Chinese Government, since any such implication would be impos-
sible over so vast an area.

“Our China Aid Program was designed to give the Chinese Gov-
ernment a breathing spell to initiate those vital steps necessary to pro-
vide the framework within which the base for economic recovery might
be laid and essential for its survival. It was clear that in the main
solution of China’s problems was largely one for the Chinese them-
selves and the aid was intended to give the Chinese Government
further opportunity to take measures of self-help.

“The general basic considerations governing our approach to the
China problem were set forth in my statement before the Senate For-
eign Relations and House Foreign Affairs Committees executive ses-
sions, a copy of which was forwarded to you. The United States
Government must be exceedingly careful that it does not become com-
mitted to a policy involving the absorption of its resources to an un-
predictable extent as would be the case if the obligations are assumed
of a direct responsibility for the conduct of the civil war in China or
for the Chinese economy, or both. To achieve the objective of reducing
the Chinese Communists to a completely negligible factor in China
in the immediate future, it would be necessary for the United States
virtually to take over the Chinese Government and administer its
economic, military and governmental affairs. Strong Chinese sensi-
bilities regarding infringement of China’s sovereignty, the intense
feeling of nationalism among all Chinese, and the unavailability of
qualified American personnel in large numbers required argue strongly
against attempting such a solution. It would be impossible to esti-
mate the final cost of a course of action of this magnitude. It certainly
would be a continuing operation for a long time to come. It would
involve the United States Government in a continuing commitment
from which it would practically be impossible to withdraw, and it
would very probably involve grave consequences to this nation by
making of China an arena of international conflict. Present develop-
ments make it unlikely that any amount of United States military or
economic aid could make the present Chinese Government capable of
reestablishing and then maintaining its control throughout all China.
There is little evidence that the fundamental weaknesses of the Chinese
Government can be basically corrected by foreign aid. These con-

IT. S. RELATIONS WITH CHINA

282

siderations were set forth in my statement in February and they are
certainly no less true under present circumstances.

“Despite American aid since V-J Day, including the China Aid
Program, deterioration has continued to a point, as you say m your
report of October 22, where the present regime has lost the confidence
of the people, reflected in the refusal of soldiers to fight and the re-
fusal of the people to cooperate in economic reforms. This descrip-
tion is generally consistent with that given in previous Embassy re-
ports and Shanghai’s report of October 21, which quotes [a high Gov-
ernment official], a strong supporter of the Generalissimo, as saying
that 99 percent of the people are against the Government, and Taipei s
report of October 22 which quotes [a high official] as saying that
unless the Government gets out of office soon the people themselves

are about ready to throw them out.

“In your report of May 26 you state that the present Government
lacks the capability to halt the spread of Communism and wdl con-
tinue to lack the capability unless, as seems unlikely, it can find the
inspired leadership needed to rally people and restore to the Na-
tional armies the will to fight. You also say that the Generalissimo
cannot be expected to provide that leadership as he seems incapable of
change and gives every evidence of intention to persist in personal
rule which has resulted in the present sad state of affairs.

“Furthermore, in your report of J une 14 you described the General-
issimo’s assurance of agreement with your recommendation regarding
the conduct of military operations by General Ho Ying-chin with
General Barr’s close collaboration and his subsequent instructions to
the contrary that all operations were to be carried out under the Gen-
eralissimo’s instructions through his ‘incompetent’ Chief of Staff.

“Your report of June 22 states that it would appear that the Gen-
eralissimo’s predisposition to appoint his old and personally trusted
comrades, regardless of their proven corruption or lack of ability, to
posts of responsibility still outweighs his desire for good government.

“Your report of August 10 states there is no longer faith that the
present Government can bring a return to an even bearable standard
of living without some radical reorganization ; that without the Gen-
eralissimo disintegration seems inevitable, yet long experience with
him suggests that he is no longer capable of changing and reforming
or discarding inefficient associates in favor of competent ones; that
one would expect the Government to clutch at any means of improving
the situation but it ignores competent military advice and fails to take
advantage of military opportunities offered, due in a, large part to the
fact that the Government and the military leadership continue to de-
teriorate as the Generalissimo selects men on the basis of personal re-

AMBASSADORSHIP OF JOHN LEIGHTON STUART 283

liability rather than military competence ; and that there is awareness
of the desperate military situation yet no evidence of the will or cap-
ability to cope with it.

“In your report of August 20 you state that General Barr’s advice
to the Generalissimo on specific problems arising from the conduct of
current military operations has in general been ignored and that the
grave difficulties encountered by General Barr in the accomplishment
of his mission originate entirely in the failure of the Chinese high
command to perform its functions.

“In your report of August 10 you state we must recognize that the
present Government or any anti-Communist Chinese combination can
scarcely be expected to completely eliminate the Communist menace
by military or any other means.

“Your report of October 16 states that there are not many Chinese
who continue with conviction to support the Generalissimo except his
immediate followers and certain ranking military officers, and that
the Government, but especially the Generalissimo, is more unpopular
than ever and is increasingly denounced. You also say that it is dif-
ficult to see at this late date how any efforts on our part, short of armed
intervention on a very large scale, can avert further military disaster,
with the likelihood that coalition in some form will result.

“In your report of October 22 you say ‘our military advisers’ feel
that the Nationalist military establishment has very likely already
suffered too great losses in manpower, materiel and morale to make
any such effort successful, that there is just no will to fight left in
the Nationalist forces and that you can find no effective w T ay to change
the situation. You further state that a moral resurgence of Chinese
will to resist Communist aggression is required and that the requisite
leadership just is not available.

“The foregoing picture of the China situation and its possible de-
velopments is generally borne out by some fifteen other Embassy
reports between May and October. This appraisal is also borne out
by other information reaching the Department, such as Tientsin’s
report of October 14.

“Recent Nationalist military reverses support the foregoing pic-
ture. Tsingtao’s report of October 1 states that the majority of Gov-
ernment troops at Tsinan did not want to fight, while those that did
fight found their position made impossible by the disaffected, and that
the Government forces at Tsinan had ample ammunition and food,
and assurance of further supplies in the event of a protracted siege.
Mukden’s report of October 19 gives a similar picture of the fall of
Chinchow, stating that the early collapse of Chinchow’s defenses was
caused by the defection of two divisions of the Government’s 93rd

284

U. S. RELATIONS WITH CHINA

Army. The fall of Changchun was similarly aided by the defection
of Government units. In each case the fall of the cities v T as reportedly
accompanied by the loss of considerable quantities of military materiel
through the defection and surrender of sizable numbers of Govern-
ment troops.

“Possibly pressing the Generalissimo for removal of incompetents
does not appear promising in the light of his recent appointment, as
you reported on October 19, of General Tu Li-ming to command in
the Northeast in the face of repeated American advice against placing
him in a responsible command. The reference to increased Jusmag
[Joint United States Military Advisory Group in China] personnel,
functions and authority after prior agreement by the Generalissimo
on the acceptance and implementation of Jusmag advice as the price
of stepped-up aid flies in the face of all previous experience of
American advisers in China. You will recall the decisions regard-
ing United States military advisers reached in my meeting with Sec-
retary Royall, Undersecretary Draper, General Bradley, General
Wedemeyer and others on June 11, when it was agreed that United
States military advisers should not be placed with Chinese units in
operational areas.

“With reference to shipments of arms and ammunition as quickly as
possible, the United States National Military Establishment is making
every effort to speed delivery of military materiel being purchased
from the $125,000,000 grants. The Department of the Army states
informally that the loading of nearly all the ammunition covered by
the Chinese request for 37.8 million dollars of arms and ammunition
is expected to be completed on the West Coast about mid-November
and the shipment should reach China by early December. Every
effort is being made to expedite the shipment of other materiel under
this program. The National Military Establishment is also endeavor-
ing to arrange shipment of all arms and ammunition which Scap can
advance and delivery of this materiel is expected to be made during
November. Authorization for the disbursement of the $103,000 ; 000
requested by the Chinese Government from the $125,000,000 grants
has been transmitted by the Department to the Treasury Department
and the latter has paid to the Chinese Government, or to the United
States Departments of the Army, Navy and Air Force, as directed by
the Chinese, $97,000,000 of this total, the balance of $6,000,000 to be
paid October 25. You will realize no means exist to extend military
aid to China other than United States assistance to the Chinese Gov-
ernment under the $125,000,000 grants.

“In summary, adoption of a course of increased aid would violate
all basic considerations underlying American policy toward China,

AMBASSADORSHIP OF JOHN LEIGHTON STUART

285

would involve the United States directly in China’s civil war, would
commit this Government to underwriting the Chinese Government
militarily and economically at a cost which it would be impossible
to estimate at a time when the United States has heavy commitments
throughout the world in connection with foreign aid programs and
would not, in the light of appraisals of the situation submitted by the
Embassy and consular offices in China over a period of several months,
achieve its avowed objectives.”

In another inquiry on October 23, the Ambassador suggested a num-
ber of possible alternatives and requested instructions :

“(A) Will we continue to recognize and support the Nationalist
Government should they be forced to move elsewhere in China because
of continuing military reverses ?

“ (B) Would we advise the retirement of the Generalissimo in favor
of Li Tsung-jen or some other national political leader with better
prospects of forming a republican non-Communist government and
of more effectively prosecuting the war against the Communist rebels?

“(C) Would we approve the retirement of the Generalissimo in
favor of some Chinese leader who could bring an end to the civil war
on the best possible terms for the Nationalist forces and the non-Com-
munist political parties ?

“(D) In the latter course would we recognize and support a coali-
tion government resulting from termination of hostilities and in-
volving cooperation with the Communists for a united China? or,

“(E) Would we give de facto recognition to such governments, the
while withholding any Eca or other support?

“I appreciate the difficulties which these seemingly hypothetical
questions pose for you and your advisers. However in the acute crisis
which I foresee for the Generalissimo and his government I feel that
I must have the benefit of your most recent thinking on the above
specific points or in more general terms if you prefer in order ade-
quately to represent the views of the United States in this critical
phase of our relations with China.”

To this, the Secretary replied as follows :

“With respect to the hypothetical questions raised by you on October
23, the United States Government cannot place itself in a position
of advising the retirement of the Generalissimo or the appointment
of any other Chinese as head of the Chinese Government. To offer
such advice is to accept responsibility for developments arising from
the acceptance thereof and inferentially to commit the United States
Government to support the succeeding regime regardless of United
States interests. The difficulty *of our position in the event the Gen-

286

U. S. RELATIONS WITH CHINA

eralissimo and his Government raise such questions is appreciated but
it is not in the national interest to vouchsafe cut and dried answers
to these oversimplified questions. . . . What can be said in answer

to your questions is that the United States Government will cer-
tainly continue to support the National Government as long as it
remains an important factor on the Chinese scene. What course
we would adopt should it move from Nanking, collapse, disappear or
merge in a coalition with the Communists would have to be decided
at the time in the light of United States interests and the then existing
situation.

“As stated in my instruction of August 13, it is not likely that the
situation will make it possible for us at this juncture to formulate
any rigid plans for our future policy in China. Developments in
China are obviously entering into a period of extreme flux and con-
fusion in which it will be impossible with surety to perceive clearly
far in advance the pattern of things to come and in which this Gov-
ernment plainly must preserve maximum freedom of action.”

In the development of his thinking on the problem facing the
United States, the Ambassador on October 28 observed to the Depart-
ment that :

“What we really object to in Communism is not its admittedly so-
cialized reforms but its intolerance, its insidious reliance on fifth
column and similar secretive methods, its ruthless suppression of all
thought or action that does not conform, its denial of individual
human rights, its unscrupulous reliance on lying propaganda and any
other immoral means to attain its ends, its fanatical dogmatism in-
cluding its belief in the necessity for violent revolution. All these
evils plus the fact that policy is directed from Moscow, apply to
Chinese Communism as truly as elsewhere. Our problem is how to
retard or expose or neutralize their influence in China.

“Evil in Communism is moral or political rather than military.
Predominance of the latter aspect in China is largely a historical
accident. Even if we had been able to assist the Chiang Government
by military means to clear an area of militant communism — which
is all we could have hoped to do at best— we would still have been
obliged to assist in educational and other processes by which the non-
Communist section would be able to demonstrate superiority of genu-
ine democracy. Otherwise, military gains would have proved self-
defeating.”

CHINESE REQUESTS FOR FURTHER MILITARY ASSISTANCE

During November, at the Paris session of the General Assembly of
the United Nations, Dr. T. F. Tsiang, then head of the Chinese Dele-

AMBASSADORSHIP OF JOHN LEIGHTON STUART

287

gation, approached Secretary of State Marshall on behalf of the
Chinese Foreign Minister to inquire regarding the possibility of the
appointment of American Army officers to actual command of Chinese
Army units under the guise of advisers and the appointment of an
officer of high rank to head a special mission. In the reply given to
this request attention was called to the inherent difficulties involved
in an attempt on the part of a newly appointed foreign official to
advise the Chinese Government regarding its courses of action even
if such an official were completely conversant with all the numerous
difficulties of the situation and the even greater difficulties for a for-
eign official not familiar with China. Dr. Tsiang also inquired as to
the possibility of expediting the deliveries of military materiel, and
was assured that all possible was being and would be done. In reply
to his inquiry regarding the desirability of an appeal to the United
Nations, he was informed that this was a matter for decision by the
Chinese themselves. 48

The Generalissimo then addressed a letter to President Truman, 49
in which he asked for increased aid on the grounds that China was in
danger of being lost to the cause of democracy. He said that the most
fundamental factor in the general deterioration of the military situa-
tion was the nonobservance by the Soviet Union of the Sino-Soviet
Treaty of Friendship and Alliance, which, “as Your Excellency will
doubtless recall, the Chinese Government signed as a result of well-
intentioned advice from the United States.” He also asked for a high-
ranking military officer as adviser, and a firm statement of American
policy in support of the cause for which his Government was fighting.

The reply of the President was delivered on November 13. 60 It
stated that all possible was being done to expedite the shipment of
supplies and repeated what Secretary Marshall had told Dr. Tsiang
regarding an adviser. The President called attention, however, to
the fact that Major General Barr, Director of the Joint United States
Military Advisory Group in China, was conversant with the current
situation and that his advice had always been available to the General-
issimo. The President adverted to his statement of March 11, 1948,
which, he said, made the position of the United States abundantly
clear. He concluded that it was with the hope of supporting the cause
of peace and democracy throughout the world that the United States
had extended assistance to the Chinese Government and that the
United States Government would continue to exert every effort to
expedite the implementation of the program of aid for China.

48 See annex 162 (a) and (b).

49 See annex 163.

60 See annex 164.

288

U. S. RELATIONS WITH CHINA

The estimate of the military situation furnished the Department by
the Embassy at Nanking on November 6 made it impossible to expect
that the appointment of a high-ranking United States military officer
could cause any change in the situation :

“We gathered together senior military personnel Jusmag and Serv-
ice Attaches, who, after discussing military situation, were unanimous
that short of actual employment of United States troops no amount
of military assistance could save the present situation in view of its
advanced stage of deterioration. Agreeing that employment of
United States troops was impossible, it was the conclusion of the group
that there w T as no military step China or the United States could take
in sufficient time to retrieve the military situation.”

From then until the end of the year high officials of the Chinese
Government approached the Ambassador in varying degrees of pessi-
mism, asking his advice and assistance. To all such approaches he
expressed assurances of continuing American sympathy but made it
clear that the American Government could not assume responsibility
for decisions which properly lay with the Chinese Government. 51

It was against this background that a new cabinet was formed in
December 1948 with Dr. Sun Fo as the new President of the Executive
Yuan or Prime Minister. 52

VIII. CHINESE DEVELOPMENTS IN 1949

PRESIDENT CHIANG’S NEW YEAR’S MESSAGE

At the beginning of the year there were rumors that the General-
issimo would withdraw from the presidency and turn over control
to the Vice President, General Li Tsung-jen. Rumors of his with-
drawal were strengthened by his New Year’s message to the nation 63
in which he indicated that the National Government would be willing
to enter into peace negotiations with the Chinese Communists and that,
if peace could be secured, he would not be concerned about his own
position.

The Ambassador on January 3 commented as follows on this New
Year’s message:

“My first reaction was favorable. It was dignified and conciliatory.
There was less abuse of the Communists than usual. In assuming

61 See annexes 165 (a)-(h).

62 See annex 166 for a series of chronicle round-up reports written by the Em-
bassy in Nanking during 1948. These informal reports give a summary account
of the over-all situation during the year.

63 See annex 167.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

289

blame for the national distress the Generalissimo was in the best tradi-
tion and in indicating his readiness either to continue or retire he was
in accord with new democratic concepts.

“But on further thought the fatal flaws reveal themselves. It was
too much a literary composition in the grand manner. It has the
gracious tone of a powerful ruler dealing with troublesome rebels. In
this it ignored unpleasant realities: the virtual collapse of military
capacity, the failure of the latest monetary measures, the almost uni-
versal desire for peace and the impossibility of it as long as he stays
in office.

“The other flaw was more serious. In a sense he has made conces-
sions but in doing so has not gone far enough. His stubborn pride,
his anger over the Communist war criminal list which he heads, the
influence of . . . irreconcilables led him to retract his forthright
decision made earlier in the week to resign and leave the Vice Presi-
dent free to adopt any policy that might seem to him to be for na-
tional welfare. Yet the pressure was too strong and his original
intention too definite for him to avoid any reference to his own will-
ingness to retire. This will destroy what ever is left of will to fight
among his troops. There was at once division of opinion among mili-
tary officers. The position taken seems to be the result of compromise
among the various groups in the Kuomintang. Each of the Gener-
alissimo’s five conditions may be taken to represent emphasis of one
of these factions. In attempting to reconcile them all he may further
intensify internal disagreements. Communist reaction can be easily
surmised. Their attitude will doubtless be uncompromising. Flushed
with success and with victory in sight they want to complete the task
of eradicating once and for all the evil influence of the Kuomintang,
precisely as Chen Li-fu and his supporters have consistently argued
regarding the Communists. Whether by this the Communists mean
only the present leadership and structural organization of the Kuo-
mintang can only be learned from their future behavior. But it will
seem that the Kuomintang at any rate must succumb to the dynamic
purpose of the Communists and because of its own shortcomings.
Once the Communists have eliminated this source of opposition they
might propose some inclusive form of coalition and attempt a politi-
cal settlement with political resistance groups in the outlying
provinces.

“In any event a movement was started on New Year’s day which
would seem to be the beginning of the end of military conflict on a
national scale.”

U. S. RELATIONS WITH CHINA

290

PRIME MINISTER SUN FO’S NEW YEAR’S MESSAGE

On New Year’s Day also Dr. Sun Fo, the Prime Minister, broad-
cast a message to the Chinese people repeating the Generalissimo’s
statement regarding the desire of the Chinese Government for peace.
Of some interest was his reference to the period of peace negotiations
in 1946 :

“You will recall that, shortly after Y-J Day, a political consultative
conference was called, which was attended by representatives of all
political parties and leading independents. The Government decided
to call this conference because it was generally realized that the coun-
try and the people needed recuperation and peace so that rehabilita-
tion work could be started. After three weeks of concerted efforts,
and thanks to the good offices of General George Marshall as Presi-
dent Truman’s Special Envoy to China, a program for the settle-
ment of all disputes was worked out.

“Had these measures been carried out at that time, all of us would
have seen more prosperity and happiness in our midst. Unfortu-
nately, all the parties concerned could not completely abandon their
own selfish ends, and the people in general did not exert sufficient
influence in promoting this peace movement.”

CHINESE REQUEST FOR FOREIGN MEDIATION

On January 8, 1949, the Chinese Foreign Minister requested the
American, British, French and Soviet Governments to act as inter-
mediaries in the initiation of negotiations with the Chinese Commu-
nist Party with a view to obtaining a restoration of peace. 54

On January 12 the United States replied to the Chinese request
in the following aide-memoire:

“The United States Government has received and has given careful
consideration to the aide-memoire delivered by the Chinese Minister
for Foreign Affairs to the United States Ambassador at Nanking on

January 8, 1949. .

“It is noted in the aide-memoire that the Chinese Government is
most anxious that the internal situation in China should not in any
way become an impediment to the progress of world peace. It is also
noted that the Chinese Government took steps immediately following
the Japanese surrender to initiate and carry on peace negotiations with
the Chinese Communist Party.

“It will be recalled that these negotiations in September and October
1945 resulted in agreement for the convening of a Political Consulta-
tive Conference, to be composed of representatives of all political

M For text of aide-memoire of Jan. 8, 1949, see annex 168.

AMBASSADORSHIP OF JOHN LEIGHTON STUART

291

parties as well as non-party Chinese leaders, for the purpose of form-
ing a constitutional government in which all Chinese parties and
groups would be represented. It will also be recalled that subsequent
to these negotiations clashes between the armed forces of the Chinese
Government and of the Chinese Communist Party became increasingly
widespread. It was at this juncture in December 1945 that the United
States Government, motivated by the same anxiety as that expressed
in the Chinese Government’s aide-memoire under acknowledgment
with respect to the danger to world peace from the internal situation
in China and desirous of doing everything within its power to assist in
bringing peace to China, offered its good offices in the hope that a peace-
ful settlement of their differences could be achieved by the Chinese
themselves along the lines of the agreement reached in September and
October. In furtherance of that Chinese agreement and with the con-
sent of the Chinese Government and the Chinese Communist Party,
General Marshall shortly after his arrival in China on December 21,
exerted his good offices in assisting the Chinese Government and the
Chinese Communist Party to reach an agreement for a cessation of
hostilities with the hope that discussions by the Chinese of their differ-
ences could be conducted in an atmosphere of peace.

“Following the convening of the Political Consultative Conference
and its approval of resolutions providing for the settlement of political
differences and the establishment of a constitutional government to
include all parties and groups in China, General Marshall again ex-
erted his good offices in connection with the agreement reached for
the reorganization of all Chinese armed forces and their amalgama-
tion into a national army responsible to a civilian government.

“The negotiations between the Chinese Government and the Chinese
Communist Party subsequently broke down and the various agree-
ments were not implemented. The United States Government, there-
fore, after having made every effort to assist the Chinese in bringing
peace to China through implementation of the fundamental political
agreements arising out of the Chinese Government’s negotiations with
the Chinese Communist Party immediately after the Japanese sur-
render, considered that it had no alternative to withdrawal from its
position as an intermediary.

“In the light of the foregoing, it is not believed that any useful
purpose would be served by the United States Government’s attempt-
ing, in accordance with the Chinese Government’s suggestion, to act
as an intermediary in the present situation.”

The Ambassador was instructed that if he were asked any questions
he should limit his reply to the confines set by the President’s message
to Congress of February 18, 1948, and the statement by the Secretary

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U. S. RELATIONS WITH CHINA

of State to the House Foreign Affairs Committee on February 20. 55
He was also to assure the F oreign Minister of the sympathetic interest
and genuine friendship of the American people for the people of
China. On the same day, the Chinese Ambassador in Washington
called on the Acting Secretary of State to ascertain if, in the event
the Chinese request were refused, the United States would consider
issuing a statement indicating that the Chinese Government sincerely
desired a peaceful settlement. He was informed that such action
would be inappropriate. France, Great Britain and the Soviet Union
also refused the Chinese request for mediation.

THE RETIREMENT OF THE GENERALISSIMO

By the end of 1948 the Chinese Communist forces were in strength
in the Pengpu area north of Nanking and the best of the Nationalist
forces had been withdrawn through Nanking south of the Yangtze
Biver. The grave military position of the National Government was
reflected in the estimate submitted in December by General Barr,
Director of the Jusmag in China, that only a policy of unlimited
United States aid, including the immediate employment of the United
States armed forces, which he said he did not recommend, would
enable the National Government to maintain a foothold in South
China against a determined Chinese Communist advance. By the
latter part of January the Chinese Communist forces had moved to
the north bank of the Yangtze in the Nanking-Shanghai area and
were in position to attempt a crossing of the river.

On January 21 the Generalissimo issued a statement announcing
his decision to retire and left Nanking for Fenghua, his birthplace.
He declared:

“With the hope that the hostilities may be brought to an end and
the people’s sufferings relieved, I have decided to retire. As from
January 21st, Vice-President Li Tsung-jen will exercise the duties
and powers of the President in accordance with Article 49 of the con-
stitution which provides that ‘in the event the President is for any
reason unable to perform his functions, his duties and powers shall
be exercised by the Vice President.’ ”

The Generalissimo’s action was, in effect, recognition of the over-
whelming desire of the Chinese people for peace. As he stated:
“Since I issued my New Year message urging the restoration of peace,
the entire nation with one accord has echoed its unreserved support.”

On January 24, 1949, the Chinese Ambassador at Washington offi-

60 See pp. 379-380.

AMBASSADORSHIP OF JOHN LEIGHTON STUART 293

cially notified the Department of State of the Generalissimo’s decision
and of the assumption of office by Vice President Li Tsung-jen.

THE POSITION AND POLICIES OF ACTING PRESIDENT LI

On January 23 a representative of the Acting President called on
Ambassador Stuart to request a public statement of support from the
United States. This representative said that General Li had been in
touch with the Soviet Embassy and had worked out a tentative three-
point draft agreement between China and the Soviet Union which the
Soviet Ambassador had taken with him to Moscow a few days earlier.
The three points were: (1) strict Chinese neutrality in any future
international conflict; (2) the elimination of American influence to as
great an extent as possible in China; (3) the establishment of a basis
of real cooperation between China and Russia. General Li had agreed
to these three points in principle and felt that his hand would be
strengthened in negotiating on them if he had a statement of Ameri-
can support. The Department at once replied that it considered it
“incredible that Li Tsung-jen should seek a United States statement
indicating support for the purpose of strengthening his position while
at the same time arranging a tentative agreement with Russia calling
for elimination of American influence from China.” The Ambassador
was instructed to make these views known to General Li.

In the meantime, the Acting President had directed General Chang
Chun, General Chang Chih-chung and Mr. Chen Li-fu to seek a direct
approach to the Chinese Communist Party. The Acting President
also summoned an unofficial peace mission to fly to Peiping to arrange
for the subsequent reception of an official peace mission. With his en-
couragement an unofficial Shanghai peace delegation proceeded to
Peiping to discuss peace arrangements with the Chinese Communists.
The Chinese Communist Party continued to hold to its publicly an-
nounced eight-point peace terms as the basis of a settlement :

1. Strict punishment of war criminals.

2. Abolition of the constitution.

3. Abolition of the Kuomintang legal system.

4. Reorganization of Nationalist troops according to democratic
principles.

5. Confiscation of “bureaucratic” capital.

6. Reformation of the land system.

7. Abolition of “treasonous treaties.”

8. Convocation of a Political Consultative Conference with non-
participation of “reactionary elements,” establishment of demo-
cratic coalition government, taking over all authority of the
“Kuomintang reactionary government” and all its strata.

294

U. S. RELATIONS WITH CHINA

These terms were equivalent to unconditional surrender, but the
Government’s condition was so serious that it felt compelled to make
an effort toward negotiation with a view to obtaining modification.

On February 5, pursuant to a decision of the Executive Yuan,